7/2025 Jaanika Meriküll, Tairi Rõõm. Unravelling the overlooked dimension: Wealth inequality at the household vs individual level
Working Papers of Eesti Pank 7/2025
Wealth inequality has been growing in advanced economies since the 1980s, prompting increasing interest in how it is measured and what drives it. Most existing studies rely on household-level data, as wealth information is typically collected at the household level in surveys. However, estimating wealth inequality at the household level may not provide a complete picture, since these estimates do not capture the within-household dimension of inequality. The aim of this study is to shed light on this missing component. Our estimations show that individual-level wealth inequality estimates are substantially higher than household-level estimates: the Gini coefficient is 6–8% higher, and the top 5% wealth share is 8–12% higher when measured individually. Individual-level wealth estimates are typically obtained by assuming that wealth is equally divided between household members. We estimate a counterfactual wealth distribution by applying this assumption and show that it considerably underestimates actual individual-level inequality: the downward bias in the estimated Gini coefficient is 10–12%. We also examine who would gain and who would lose from an equal split of wealth within households. Finally, we apply factor decomposition to examine how various components of net wealth influence inequality and whether these estimates differ depending on the level of wealth measurement.
