To Own or Not to Own? Household Portfolios, Demographics and Institutions in a Cross-National Perspective

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Using harmonized wealth data and a novel decomposition approach, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the U.S. and Canada. We find that younger households' participation decisions in assets are more responsive to income than older households. Family structure plays a significant role in explaining cross-country differences for both cohorts. Examining institutional differences, we find that in more financially developed and economically open countries, households are less likely to own housing but more likely to be in debt. Typical mortgage characteristics and mathematical literacy are also correlated with debt participation across countries. These findings have important implications for policy setting during times of financial unease for the young, as well as for the future in helping secure adequate income for the elderly. Our results show that there is scope for policies which promote asset participation for young households and debt participation, where there is a need for consumpation smoothing, for older households. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: G11, G21, J10

Cross-National Differences in Wealth Portfolios at the Intensive Margin: Is there a Role for Policy?

“…Wealth data can be used to study the way in which households acquire assets and the role they play in improving living standards and creating future opportunities for the owner and their children. In our previous work on wealth participation (Sierminska and Doorley (2013), we find that income and household composition explain a lot of the cross-country differences in asset and liability ownership for young households. For older households, education and household composition seem to be the main observable drivers.…”

“…This gap suggests that there is an unobserved reason for Canadian households to increase their risky asset holdings, particularly older households at the top of the risky asset distribution. The participation gap in risky assets was also found to be driven by characteristics mostly income and education (Sierminska and Doorley (2013)). …”

“…Table A.1 shows the instruments that are available in each country. A comparison of this harmonized cross-country database to other sources (the HFCS data and the SHARE data for the over-50 population) is undertaken in Sierminska and Doorley (2013) and indicates that the LWS framework that we adopt to harmonize the different surveys across countries leads to similar participation rates in each of the instruments in the wealth portfolio.…”

“…Just as the decision to participate in different components of wealth portfolios may differ across countries (Sierminska and Doorley, 2013), so too may the level of holding, given participation, differ across countries. Table 3 describes the mean level of each portfolio instrument held in each country by the whole population.…”

“…In comparison to the participation decision in financial assets, for which characteristics explain just a small part of the cross-country gap (Sierminska and Doorley (2013)), the level of financial assets held, conditional on participation, is almost entirely explained by household characteristics although there are some unexplained factors driving the gap at the top of the asset distribution suggesting that, for most households, once they make the decision to own financial assets, the levels are mostly driven by their family and economic characteristics.…”