The distribution of financial wealth in the UK: evidence from 2000 BHPS data

Abstract

A further problem with the aggregate saving rate, in particular, as a measure of saving behaviour, is in the treatment of passive saving (i.e. accumulation through unrealised capital gains). For a discussion of this issue in the US context, see W. Gale and J. Sabelhaus, 'Perspectives on the household savings rate',

The wealth and saving of UK families on the eve of the crisis

“…Two previous investigations into the holdings of financial wealth among UK households (Banks & Tanner (1999) and Banks, Smith & Wakefield (2002)) come to a conclusion similar to ours. They find, using different sources of data, that median financial wealth in 1997-1998 and 2000 was respectively £1,000 and £750 in real terms.…”

“…For these households we impute their level of wealth. Our method of imputation is the same as that used by Banks et al (2002), who analysed the distribution of wealth in 2000 using the wealth module of the BHPS. Appendix A details the importance of this imputation, and explains the procedure that we use.…”

“…Previous papers that have examined these questions include Banks & Blundell (1994), who looked at rates of household saving between 1969and 1990, Banks & Tanner (1999, who looked at levels of wealth in the late 1990s, and Banks et al (2002), who used detailed data to summarise the distribution of household Introduction wealth in 2000. More recently, Banks et al (2005) investigated the distribution of wealth among the over 50s in 2002/03.…”

Why do home owners work longer hours?

“…Whereas in the remainder of the paper we use panel data from the British Household Panel Survey (BHPS) which has been available since 1991, in this section we want to display longer time series and so draw home ownership and labour supply profiles from repeated cross-sections of the Family Expenditure Survey (FES). 2 To create a pseudo panel from these data, groups are defined by date-of-birth and education, 3 where, as throughout this paper, education groups are defined on the basis of academic achievement of the household head, and "high education" means that the household head remained in education beyond the compulsory period.…”

“…If h t = 1, then if the consumer wants to borrow more than the previous period (either because they are taking out a new mortgage or because they have an existing mortgage but want to re-mortgage and borrow more), then constraint (2) imposes that the amount they can borrow is limited to (the smaller of) λ h times the value of the house and λ y times current income. The value (1 − λ h ) can be thought of as a downpayment requirement.…”