In this paper the authors describe the household wealth distribution in the U.S. and the U.K., and compare both wealth inequality and the form in which wealth is held. Unconditionally, there are large differences in financial wealth between the two countries at the top fifth of the wealth distribution. Even after controlling for age and income differences between the two countries, the authors show that the median U.S. household accumulates more financial wealth than its U.K. counterpart. They explore a number of alternative reasons for these differences and reject some explanations as implausible. Some of the observed differences are due to what the authors refer to as "initial conditions," in particular previously high rates of corporate equity ownership in the U.S. and housing ownership among young British households. But since these differences existed even in the early 1980s, initial conditions only provide a partial explanation. One other partial explanation may be that due to forced and voluntary annuitization of retirement incomes, older British households face considerably less longevity risk.
Originally published in: Journal of Human Resources, v. 38, no. 2, 2003, pp. 241-279.
This report is part of the RAND Corporation Reprint series. The Reprint was a product of the RAND Corporation from 1992 to 2011 that represented previously published journal articles, book chapters, and reports with the permission of the publisher. RAND reprints were formally reviewed in accordance with the publisher's editorial policy and compliant with RAND's rigorous quality assurance standards for quality and objectivity. For select current RAND journal articles, see External Publications.
Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.