Accounting for cross-country differences in wealth inequality

There is considerable cross-country variation in levels of household wealth and in wealth inequality. This paper assesses the extent to which these differences can be accounted for by differences in the distributions of households’ demographic and economic characteristics. A counterfactual decomposition analysis of micro data from five countries (Italy, UK, US, Sweden and Finland) is used to identify the effects of characteristics on component wealth holdings, their value and their distribution. The findings of the paper suggest that the biggest share of cross-country differences is not attributable to the distribution of household demographic and economic characteristics but rather reflect strong unexplained country effects.