The relative role of socio-economic factors in explaining the changing distribution of wealth in the US and the UK

In this paper we show that while both the US and the UK enjoyed substantial increases in net wealth over the period 1994/95-2005/06, which were largely driven by house price booms in both countries, the distribution of these gains across households led to a slight increase in wealth inequality in the US but a substantial fall in inequality in the UK. We use a decomposition technique to examine the extent to which changes in households’ socio economic characteristics explain changes in wealth holdings and wealth inequality. In both countries we find that changes in household characteristics had an equalising effect on wealth inequality; moderating the increase in the US and accounting for over one-third of the fall in inequality in the UK.