IDEAS home Printed from https://ideas.repec.org/p/iae/iaewps/wp2021n04.html
   My bibliography  Save this paper

Fair Crack of the Whip? The Distribution of Augmented Wealth in Australia from 2002 to 2018

Author

Listed:
  • Maximilian Longmuir

    (Department of Economics, Freie Universität Berlin)

Abstract

The omission of pension wealth potentially distorts the international comparison of wealth distributions. Private pension wealth is often included in households’ wealth portfolios, while public pension claims are not. Augmented wealth, the sum of net worth and pension wealth, resolves this limitation by including the present value of social security pension wealth. This paper provides a detailed analysis of augmented wealth in Australia between 2002 and 2018, capturing the establishment of the compulsory private pension scheme, Superannuation, which was introduced in 1992. Moreover, I depict the interaction of Superannuation with the public scheme Age Pension and how that affects the overall wealth distribution. Augmented wealth in Australia is found to be less equally distributed than wealth in Germany or Switzerland, but more equally than in the United States.

Suggested Citation

  • Maximilian Longmuir, 2021. "Fair Crack of the Whip? The Distribution of Augmented Wealth in Australia from 2002 to 2018," Melbourne Institute Working Paper Series wp2021n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2021n04
    as

    Download full text from publisher

    File URL: https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0010/3603691/wp2021n04.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alexandra Spicer & Olena Stavrunova & Susan Thorp, 2016. "How Portfolios Evolve after Retirement: Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 241-267, June.
    2. Katharina Knoll & Moritz Schularick & Thomas Steger, 2017. "No Price Like Home: Global House Prices, 1870-2012," American Economic Review, American Economic Association, vol. 107(2), pages 331-353, February.
    3. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    4. Bagchi, Sutirtha & Svejnar, Jan, 2015. "Does wealth inequality matter for growth? The effect of billionaire wealth, income distribution, and poverty," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 505-530.
    5. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
    6. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2007. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 707-747, October.
    7. Urban Sila & Valéry Dugain, 2019. "Income, wealth and earnings inequality in Australia: Evidence from the HILDA survey," OECD Economics Department Working Papers 1538, OECD Publishing.
    8. Hardy Hulley & Rebecca Mckibbin & Andreas Pedersen & Susan Thorp, 2013. "Means-Tested Public Pensions, Portfolio Choice and Decumulation in Retirement," The Economic Record, The Economic Society of Australia, vol. 89(284), pages 31-51, March.
    9. Annamaria Lusardi & Pierre-Carl Michaud & Olivia S. Mitchell, 2017. "Optimal Financial Knowledge and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 431-477.
    10. Greg Kaplan & Gianni La Cava & Tahlee Stone, 2018. "Household Economic Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 117-134, June.
    11. Mariacristina De Nardi, 2004. "Wealth Inequality and Intergenerational Links," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 743-768.
    12. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security and Households' Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1075-1119.
    13. Edward N. Wolff, 1996. "International Comparisons Of Wealth Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(4), pages 433-451, December.
    14. Wolff, Edward N., 2015. "Inheriting Wealth in America: Future Boom or Bust?," OUP Catalogue, Oxford University Press, number 9780199353958.
    15. Johan G. Andréasson & Pavel V. Shevchenko, 2017. "Assessment of Policy Changes to Means-Tested Age Pension Using the Expected Utility Model: Implication for Decisions in Retirement," Risks, MDPI, vol. 5(3), pages 1-21, September.
    16. Moritz Kuhn & Moritz Schularick & Ulrike I. Steins, 2020. "Income and Wealth Inequality in America, 1949–2016," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3469-3519.
    17. Ursina Kuhn, 2020. "Augmented wealth in Switzerland: the influence of pension wealth on wealth inequality," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-16, December.
    18. Paul Ryan & Tahlee Stone, 2016. "Household Wealth in Australia: Evidence from the 2014 HILDA Survey," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 1-8, June.
    19. Paul Eckerstorfer & Johannes Halak & Jakob Kapeller & Bernhard Schütz & Florian Springholz & Rafael Wildauer, 2016. "Correcting for the Missing Rich: An Application to Wealth Survey Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(4), pages 605-627, December.
    20. Andrew Berg & Jonathan D. Ostry & Charalambos G. Tsangarides & Yorbol Yakhshilikov, 2018. "Redistribution, inequality, and growth: new evidence," Journal of Economic Growth, Springer, vol. 23(3), pages 259-305, September.
    21. Mark Wooden & Simon Freidin & Nicole Watson, 2002. "The Household, Income and Labour Dynamics in Australia (HILDA)Survey: Wave 1," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(3), pages 339-348, September.
    22. Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 339-353, July.
    23. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    24. Edward N. Wolff, 2015. "U.S. Pensions in the 2000s: The Lost Decade?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 599-629, December.
    25. Geoffrey Kingston & Susan Thorp, 2019. "Superannuation in Australia: A Survey of the Literature," The Economic Record, The Economic Society of Australia, vol. 95(308), pages 141-160, March.
    26. Kudrna, George, 2016. "Economy-wide effects of means-tested pensions: The case of Australia," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 17-29.
    27. Emmanuel Saez & Gabriel Zucman, 2016. "Editor's Choice Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 519-578.
    28. Anthony Asher & Ramona Meyricke & Susan Thorp & Shang Wu, 2017. "Age pensioner decumulation: Responses to incentives, uncertainty and family need," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 583-607, November.
    29. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    30. Arthur B kennickell, 2008. "The role of over-sampling of the wealthy in the survey of consumer finances," IFC Bulletins chapters, in: Bank for International Settlements (ed.), The IFC's contribution to the 56th ISI Session, Lisbon, August 2007, volume 28, pages 403-408, Bank for International Settlements.
    31. repec:bla:ausecr:v:38:y:2005:i:2:p:159-175 is not listed on IDEAS
    32. Ulrike Steins & Moritz Schularick & Moritz Kuhn, 2017. "Wealth and Income Inequality in America, 1949-2013," 2017 Meeting Papers 931, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paolo Acciari & Facundo Alvaredo & Salvatore Morelli, 2024. "The Concentration of Personal Wealth in Italy 1995–2016," Journal of the European Economic Association, European Economic Association, vol. 22(3), pages 1228-1274.
    2. Sierminska, Eva & Wroński, Marcin, 2022. "Inequality and Public Pension Entitlements," GLO Discussion Paper Series 1212, Global Labor Organization (GLO).
    3. Wroński, Marcin, 2023. "The impact of social security wealth on the distribution of wealth in the European Union," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    4. Markus Knell & Reinhard Koman, 2022. "Pension Entitlements and Net Wealth in Austria (Markus Knell, Reinhard Koman)," Working Papers 238, Oesterreichische Nationalbank (Austrian Central Bank).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2020. "Heterogeneity and Persistence in Returns to Wealth," Econometrica, Econometric Society, vol. 88(1), pages 115-170, January.
    2. Hasan, Iftekhar & Horvath, Roman & Mares, Jan, 2020. "Finance and wealth inequality," Journal of International Money and Finance, Elsevier, vol. 108(C).
    3. Timm Bönke & Markus M. Grabka & Carsten Schröder & Edward N. Wolff, 2020. "A Head‐to‐Head Comparison of Augmented Wealth in Germany and the United States," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1140-1180, July.
    4. Kacperczyk, Marcin & Nosal, Jaromir & Stevens, Luminita, 2019. "Investor sophistication and capital income inequality," Journal of Monetary Economics, Elsevier, vol. 107(C), pages 18-31.
    5. Davies, James B. & Lluberas, Rodrigo & Waldenström, Daniel, 2024. "Long-Term Trends in the Distribution of Wealth and Inheritance," Working Paper Series 1502, Research Institute of Industrial Economics.
    6. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    7. Njangang, Henri & Beleck, Alim & Tadadjeu, Sosson & Kamguia, Brice, 2022. "Do ICTs drive wealth inequality? Evidence from a dynamic panel analysis," Telecommunications Policy, Elsevier, vol. 46(2).
    8. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 620-663.
    9. Krapf, Matthias, 2018. "The Joint Distribution of Wealth and Income Risk: Evidence from Bern," Working papers 2018/18, Faculty of Business and Economics - University of Basel.
    10. Butt, Adam & Khemka, Gaurav & Warren, Geoffrey J., 2022. "Heterogeneity in optimal investment and drawdown strategies in retirement," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    11. Andréasson, Johan G. & Shevchenko, Pavel V. & Novikov, Alex, 2017. "Optimal consumption, investment and housing with means-tested public pension in retirement," Insurance: Mathematics and Economics, Elsevier, vol. 75(C), pages 32-47.
    12. Roger Wilkins, 2021. "Economic Wellbeing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(4), pages 469-481, December.
    13. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    14. Job Boerma & Loukas Karabarbounis, 2023. "Reparations and Persistent Racial Wealth Gaps," NBER Macroeconomics Annual, University of Chicago Press, vol. 37(1), pages 171-221.
    15. Cagetti, Marco & De Nardi, Mariacristina, 2008. "Wealth Inequality: Data And Models," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 285-313, September.
    16. Andersen, Torben M. & Bhattacharya, Joydeep & Grodecka-Messi, Anna & Mann, Katja, 2024. "Pension reform and wealth inequality: Theory and evidence," European Economic Review, Elsevier, vol. 165(C).
    17. Geoffrey Kingston & Susan Thorp, 2019. "Superannuation in Australia: A Survey of the Literature," The Economic Record, The Economic Society of Australia, vol. 95(308), pages 141-160, March.
    18. Stefan Ederer & Maximilian Mayerhofer & Miriam Rehm, 2021. "Rich and ever richer? Differential returns across socioeconomic groups," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 44(2), pages 283-301, April.
    19. Henri Njangang & Alim Beleck & Sosson Tadadjeu & Brice Kamguia, 2021. "Do ICTs drive wealth inequality? Evidence from a dynamic panel analysis," Working Papers 21/057, European Xtramile Centre of African Studies (EXCAS).
    20. Moore, Rachel & Pecoraro, Brandon, 2021. "Quantitative Analysis of a Wealth Tax in the United States: Exclusions, Evasion, and Expenditures," MPRA Paper 109120, University Library of Munich, Germany.

    More about this item

    Keywords

    Augmented wealth; net worth; pension wealth; Household; Income and Labour Dynamics in Australia Survey;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2021n04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sheri Carnegie (email available below). General contact details of provider: https://edirc.repec.org/data/mimelau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.