Mind the wealth gap: a new allocation method to match micro and macro statistics for household wealth

TL;DR

This paper introduces a novel method combining Pareto modeling and imputation to correct biases in household wealth surveys, aligning micro data with macroeconomic aggregates for better policy insights.

Contribution

It develops a new allocation approach that adjusts for non-response and measurement errors in household wealth surveys using limited external data.

Findings

Adjusted survey weights for non-response bias

Corrected measurement errors in wealth data

Produced distributional indicators for four Euro-Area countries

Abstract

The financial and economic crisis recently experienced by many European countries has increased demand for timely, coherent and consistent distributional information for the household sector. In the Euro area, most of the NCBs collect such information through income and wealth surveys, which are often used to inform their decisions. These surveys, however, can often suffer from biases, usually caused by non-response and under-reporting behaviours, leading to a mismatch with macroeconomic aggregates. In this paper, we develop a novel allocation method which combines information from a power law (Pareto) model and imputation procedures so to address these issues simultaneously, when only limited external information is available. We provide two important contributions: first, we adjust the weights of observed survey households for non-response bias, then, we correct for measurement error. Finally, we produce distributional indicators for four Euro-Area countries.