The Dynamics of Wealth Inequality: Distributional Effects of Asset Prices in Europe

Walk, Marten (2025): The Dynamics of Wealth Inequality: Distributional Effects of Asset Prices in Europe.

Abstract

How do asset prices shape the wealth distribution? Motivated by the different trajectories of European housing markets after the financial crisis, this thesis examines how capital gains, particularly in housing, influence wealth inequality in Europe. Drawing on the ECB’s new Distributional Wealth Accounts, the analysis uses panel regressions that exploit cross-country variation in housing markets. The results show that asset prices have first-order consequences on the wealth distribution, driven by differences in portfolio composition across population groups. Rising house prices benefit the middle 40% and especially the bottom 50%, while a booming stock market concentrates gains in the top 10%. These effects are robust across specifications but vary substantially across countries, reflecting institutional and portfolio differences. Simulations of alternative price scenarios show that housing booms can slow concentration. However, no country saw house prices grow fast enough to reverse the upward trend in top wealth shares in Europe. Together, the results provide detailed insights into the distributional effects of asset prices in Europe, with implications for both monetary and housing policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Wealth Inequality, Asset Prices, Distributional Wealth Accounts, Europe, House Prices
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure

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