Comparative political economy (CPE) has robustly examined the political and institutional determinants of income inequality. However, the study of wealth, which is more unequally distributed than income, has been largely understudied within CPE. Using new data from the World Income Database (WID), this article examines how economic, political and institutional dynamics shape wealth-to-income ratios within Western European and OECD countries. It is found that the political and institutional determinants that affect income inequality have no short-or long-run effects on the wealth-to-income ratio. Rather, the rise in wealth-to-income ratios is driven by rising housing prices, as well as price changes in other financial assets, not home ownership or national saving rates. The article concludes by examining how the changing dynamics of housing prices and wealth inequality will increasingly shape intergenerationaland associated class-basedpolitical conflict in Western Europe. KEYWORDS Wealth inequality; wealth accumulation; income inequality; housing prices; comparative political economy Comparative political economy (CPE) has long been preoccupied with the political and institutional determinants of economic inequality, particularly within Western Europe. Robust debates in CPE have examined how left-wing governments, strong unions and collaborative wage-setting institutions, progressive taxation, a redistributive welfare state and public sector employment impact on income inequality (

Households and banks have increasingly displaced non-financial businesses and governments as the primary debtors in modern capitalist economies, resulting in more severe economic cycles, increased inequality, and external macroeconomic imbalances. Yet while the trend is nearly universal among developed economies, its intensity varies a great deal from country to country. This article highlights (1) the common international causes behind the global expansion of household and financial sector debt; (2) the divergent national approaches to household credit that cause household and financial sector indebtedness to vary from country to country; and (3) the likely causes of these disparate approaches. National approaches to interest rate restrictions, property transfer taxation, high loan-to-value (LTV) mortgages, mortgage interest taxation, and secondary markets for consumer debt can either encourage or mitigate household and financial sector borrowing. Whether a country encourages or mitigates such credit is determined by an idiosyncratic mix of institutional, political, and ideational factors. Especially important are the size of domestic pension funds, banks' preferred business models, the political power of financial firms, and whether policymakers are more sensitive to the gains promised by a credit-fueled expansion or to the risks posed by an overleveraged collapse.

European Economic and Monetary Union has fostered an unstable complementarity in European financial markets between the growth models favoured by European savers (in the northern 'core' of Germany and other exporting states) and its borrowers (in the debt-fuelled and demand-driven eurozone periphery, including countries like Greece and Ireland). In the 2000s, the result of this development was a sharp decrease in real interest rates across the eurozone periphery, leading to rapid but inflationary growth. This eroded the competitiveness of exporters in the European periphery, making them more reliant on capital inflows to pay for growing current account deficits. Those deficits became problematic after the disruption of eurozone financial markets beginning in 2008. The policy response to the crises has focused on reducing the competitiveness gap between the core and periphery -while overlooking the financial forces that contributed to those competitiveness differentials in the first place. Indeed, it is the fragile and perverse complementarity in eurozone financial markets -more than any external shock or competitiveness differences -that lies at the root of Europe's ongoing crisis. As prospective eurozone members prepared to irrevocably fix their exchange rates in the late 1990s, Milton Friedman (1997) took to the op-ed pages to rain on their parade. Sounding a note of scepticism about European economic and monetary union (EMU), he argued that: [The euro] would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange-rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavourable conditions will prove a barrier to the achievement of political unity.Friedman's chief concern, shared with many -particularly US-trained -economists, was rooted in Robert Mundell's notion of optimal currency areas (OCAs). In the world of OCA theory, the euro looked like a dubious proposition: because eurozone members were so economically distinct, shocks to the currency area would inevitably affect the various parts of the zone differently. Member states, robbed of exchange rate flexibility and their own monetary tools, also lacked bloclevel adjustment tools -such as easy intra-European migration or a federal government willing to transfer funds around the bloc. As a result, the critics argued, national governments would come to resent EMU as a policy straightjacket (Jonung and Drea 2009).

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