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LWS Final Conference, Roma, Italia, July 5-7 th , 2007

Examining the gender wealth gap within and across households Eva Sierminska , Joachim Frick and Markus Grabka. LWS Final Conference, Roma, Italia, July 5-7 th , 2007 “The Luxembourg Wealth Study: Enhancing Comparative Research on Household Finance. Outline. Introduction Motivation

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LWS Final Conference, Roma, Italia, July 5-7 th , 2007

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  1. Examining the gender wealth gap within and across householdsEva Sierminska, Joachim Frick and Markus Grabka LWS Final Conference, Roma, Italia, July 5-7th , 2007 “The Luxembourg Wealth Study: Enhancing Comparative Research on Household Finance

  2. Outline • Introduction • Motivation • Past Empirical Evidence • Methods • Decomposition

  3. Net Worth¹ by Martial Status and Gender

  4. Simple model of accumulation of assets in period t+1 can be expressed in the following way • r - gross rate of return on investments • Yt - income in period t • Ct - consumption in period t. • Differences in wealth accumulation could result from: • households differ in the amount they save (Y-C) • households enter the period with different stocks of assets (A) – perhaps due to inheritance. • households receive different rates of return due to differences in portfolio allocation reflecting individual variation in risk preference.

  5. Gender differences in wealth accumulation could result from: • households differ in the amount they save (Y-C) • Position in life-cycle (age) • Income ( labor market participation (Warren et al 2001); Earnings (for ex. Blau & Kahn 1997, 2000) • Differences in precautionary savings due to liquidity constraints • households enter the period with different stocks of assets (A) – perhaps due to inheritance. • Differences in probability of owning a home; discrimination in mortgage lending (Ladd 1998); differences by family type (Sedo & Kossoudji 2004) • households receive different rates of return due to differences in portfolio allocation reflecting individual variation in risk preference. • Women invest more conservatively (eg. Jiankokopolos & Bernasek 1998) Additionally: • Gender differences in family type e.g. marriage patterns (Zagorsky 1999).

  6. Male Male married Male single - Female Female Female TOTAL never TOTAL married single - never married married Demographics Age (in years) 47.1 53.3 30.5 49.4 50.2 32.0 Income Equiv. Annual Post-Govt. Income (mean) 20,788 21,877 18,712 18,915 21,355 17,091 Relative post-govt. income position 105 111 95 96 108 86 Individual Annual Labor Income (mean) 22,952 26,139 15,975 10,019 9,827 11,711 Relative labor income position 143 163 99 62 61 73 Education low (isced=0,1,2) 17.6 13.1 32.1 26.1 22.0 33.2 middle (isced=3) 47.9 47.7 44.9 47.9 51.2 40.9 (higher) vocational (isced=4,5) 13.1 13.7 10.5 11.4 11.2 12.2 higher eduation (isced=6) 21.4 25.5 12.4 14.6 15.7 13.7 Labor market status FT employed 42.6 44.9 37.4 20.6 17.0 29.4 PT employed 2.0 1.5 3.5 13.5 19.3 4.6 self employed 7.3 7.7 4.8 2.7 3.1 2.6 not employed 25.7 33.0 6.6 42.5 46.0 13.3 unemployed 6.6 5.1 7.8 5.7 4.8 6.4

  7. Inheritance

  8. LWS Wealth Variables

  9. Methods Focus on married and couple households F>M: Woman's wealth exceeds man's wealth in a couple household F=M: Equal sharing among partners in a couple household F<M: Male-in-charge: Man's wealth exceeds woman's wealth in a couple household NO: No wealth in a couple household Top/bottom code net worth

  10. Data SOEP Wealth module in 2002  LWS (household level) • Individual level (all HH members >16): • n=23.900 (12.500 HH) • Multiple Imputation (5 replicates) • Own Property • Other Property • Financial Assets (>2.500 €) Total Assets • Private Pensions • Business Assets • Tangible Assets (>2.500 €) Net Worth • Main Property Debt • Other Property Debt Total Debt • Consumer Debt (>2.500 €) Not included: cars, public pension entitlements, durables

  11. Decompose the gender wealth gap • Mean difference • Into portions attributable to differences in the distribution of endowments and differences in the return to these endowments (wealth function) or way in which the endowments are transformed into wealth (Blinder-Oaxaca) • Juhn, Murphy, Pierce (1991) method • Decomposes the component due to differences in coefficients into two parts: unobserved ability and differences in the wealth function (discrimination)

  12. Summary • Oaxaca decomposition suggests that half of the gap is due to differences in characteristics between men and women and half due to differences in coefficients • JMP takes a closer look at the gap across the wealth distribution • Bottom: large part of the gap is due to differences in characteristics (diminishes) • Bottom: the way women accumulate wealth has a reducing effect on the gap • This is not the case past the median

  13. Future work • Consistent result that a big portion of the gap is due to characteristics • Quantile regressions • Robustness checks for equal sharing assumption • marriage patterns of men vs women • Life-time work histories • Control for differences within couples • DiNardo, Fortin , Lemieux decomposition partition wealth vector: • Labor market experience, education level, intergenerational characteristics and demographic characteristics

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