Wealth inequality assumes a central role in the debate on economic inequality. Yet, much in contrast to literature on income inequality, the role of the household in moderating inequality remains poorly understood. In this paper, I argue that family structures have substantial ramifications for the measurement of wealth inequality, as household members enjoy economies of scale regarding household wealth. If wealth enters individual utility directly (bequest motives, status, …), it is possible to test for such economies of scale, which may differ from consumption scale effects. This is particularly important at the top of the distribution: Since affluent households in particular hold a lower share of their wealth for consumption purposes, the scale effects of other accumulation motives will dominate. Using capitalist-spirit-accumulation model, this paper is the first to offer a concept of economies of scale for wealth rather than an ad-hoc approach. Adapting the model to accommodate household size effects, I contribute by estimating wealth economies of scale and exploring the implications of this household size adjustment for inequality. The empirical estimates rely on a stated preferences approach. As opposed to approaches hitherto employed to adjust for household size when measuring wealth inequality, taking into account the equivalence scales developed in this approach has more pronounced implications for wealth inequality.
19 Mai 2022 → 21 Mai 2022
Department of Economics Internal Research Retreat
Österreichische Systematik der Wissenschaftszweige (ÖFOS)