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UN report finds world's richest own most of all wealth

The richest 2% of adults in the world own more than half of global household wealth according to a study released on 6 December 2006 by the United Nations’ Helsinki-based World Institute for Development Economics Research (UNU-WIDER).

The study also reports that the richest 1% of adults together owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth.

The research found that assets of US$2,200 per adult placed a household in the top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world required US$61,000 in assets, and more than US$500,000 was needed to belong to the richest 1%, a group that — with 37 million members worldwide — is far from an exclusive club.

The UNU-WIDER study is the first of its kind to cover all countries in the world and all major components of household wealth, including financial assets and debts, land, buildings and other tangible property.

The report’s co-authors said: “We use the term in its long-established sense of net worth: the value of physical and financial assets less debts. In this respect, wealth represents the ownership of capital. Although capital is only one part of personal resources, it is widely believed to have a disproportionate impact on household wellbeing and economic success, and more broadly on economic development and growth.”

Using currency exchange rates, global household wealth amounted to US$125 trillion in the year 2000, equivalent to roughly three times the value of total global production (GDP) or to US$20,500 per person. Adjusting for differences in the cost-of-living across nations raises the value of wealth to US$26,000 per capita when measured in terms of purchasing power parity dollars (PPPUSD).

Average wealth amounted to US$144,000 per person in the USA in year 2000, and US$181,000 in Japan. Lower down among countries with wealth data are India, with per capita assets of US$1,100, and Indonesia with US$1,400 per capita.

Per capita wealth levels vary widely across countries. Even within the group of high-income OECD nations the range includes US$37,000 for New Zealand and US$70,000 for Denmark and US$127,000 for the UK.

Wealth is heavily concentrated in North America, Europe, and high-income Asia-Pacific countries. People in these countries collectively hold almost 90% of total world wealth.

Although North America has only 6% of the world adult population, it accounts for 34% of household wealth. Europe and high-income Asia-Pacific countries also own disproportionate amounts of wealth. In contrast, the overall share of wealth owned by people in Africa, China, India, and other lower income countries in Asia is considerably less than their population share, sometimes by a factor of more than ten.

The study found wealth to be more unequally distributed than income across countries. High-income countries tend to have a bigger share of world wealth than of world GDP. The reverse is true of middle- and low-income nations. But there are exceptions to this rule, for example the Nordic region and transition countries like the Czech Republic and Poland.

Private wealth is on the rise in Eastern European countries but has still not reached very high levels. Relatively few households hold assets like private pensions and life insurance. In the Nordic countries, the social security system provides generous public pensions that may depress wealth accumulation.'

The concentration of wealth within countries varies significantly but is generally high. The share of the top 10% ranges from around 40% in China to 70% in the US, and is higher still in other countries.

The Gini value, which measures inequality on a scale from zero to one, gives numbers in the range from 35% to 45% for income inequality in most countries. In contrast, Gini values for wealth inequality are usually between 65% and 75%, and sometimes exceed 80%.

Two high wealth economies, Japan and the US, show very different patterns of wealth inequality, with Japan having a wealth Gini of 55% and the USA a wealth Gini of around 80%.

Wealth inequality for the world as a whole is higher still. The study estimates that the global wealth Gini for adults is 89%. The same degree of inequality would be obtained if one person in a group of ten takes 99% of the total and the other nine share the remaining 1%.

According to the study, almost all of the world's richest individuals live in North America, Europe, and rich Asia-Pacific countries. Each of these groups of countries contribute about one third of the members of the world's wealthiest 10%.

China occupies much of the middle third of the global wealth distribution, while India, Africa, and low-income Asian countries dominate the bottom third.

For all developing regions of the world, the share of population exceeds the share of global wealth, which in turn exceeds the share of members of the wealthiest groups.

A small number of countries account for most of the wealthiest 10% in the world. One quarter are Americans and another 20% are Japanese. These two countries feature even more strongly among the richest 1% of individuals in the world, with 37% residing in the USA and 27% in Japan.

According to UNU-WIDER director Anthony Shorrocks, a country's representation in the rich person's club depends on three factors: the size of the population, average wealth, and wealth inequality.

“The USA and Japan stand out,” he says, “because they have large populations and high average wealth. Although Switzerland and Luxembourg have high average wealth, their populations are small. China on the other hand fails to feature strongly among the super-rich because average wealth is modest and wealth is evenly spread by international standards.

“However, China is already likely to have more wealthy residents than our data reveals for the year 2000, and membership of the super-rich seems set to rise fast in the next decade.”

The UNU-WIDER study shows major international differences in the composition of assets, resulting from different influences on household behaviour such as market structure, regulation, and cultural preferences.

Real property, particularly land and farm assets, are more important in less developed countries. This reflects not only the greater importance of agriculture, but also immature financial institutions.

The study also reveals striking differences in the types of financial assets owned. Savings accounts feature strongly in transition economies and in some rich Asian countries, while share-holdings and other types of financial assets are more evident in rich countries in the West.

Savings accounts tend to be favoured in Asian countries, said the report, because “there appears to be a strong preference for liquidity and a lack of confidence in financial markets. Other types of financial assets are more prominent in countries like the UK and USA which have well developed financial sectors and which rely heavily on private pensions.”

Surprisingly, household debt is relatively unimportant in poor countries. As the authors of the study point out: "While many poor people in poor countries are in debt, their debts are relatively small in total. This is mainly due to the absence of financial institutions that allow households to incur large mortgage and consumer debts, as is increasingly the situation in rich countries.”

The authors go on to note that “many people in high-income countries have negative net worth and—somewhat paradoxically—are among the poorest people in the world in terms of household wealth.”

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