Housing prices and wealth inequality in Western Europe

Abstract

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 (

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