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Wealth and inheritance in Britain from 1896 to the present

Wealth and inheritance in Britain from 1896 to the present. A B Atkinson Nuffield College, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, and London School of Economics. Plan. The recent rise in UK personal wealth

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Wealth and inheritance in Britain from 1896 to the present

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  1. Wealth and inheritance in Britain from 1896 to the present A B Atkinson Nuffield College, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, and London School of Economics

  2. Plan • The recent rise in UK personal wealth • Inheritance in the UK: sources and methods • A return of inheritance in Britain? • Comparison with France • Conclusions.

  3. 1. The recent rise in UK personal wealth

  4. Role of housing

  5. National wealth/income

  6. Public and corporate sectors

  7. 2. Inheritance in UK: Sources and methods Data from 1896 to 2008 (only 13 missing years)

  8. Need adjustments • Non-filers; • Exempt (settled) property and under- and over- valuation; • Gifts inter vivos not subject to duty. • NB Not all adjustments made in estimating total wealth apply.

  9. Gifts inter vivos

  10. 3. Return of inheritance in UK?

  11. 2 U-shapes U U

  12. In relation to total personal wealth

  13. Accounting equation Basic accounting equation used by Piketty: ratio of transmitted wealth, B, to national income, Y, is equal in year t to Bt/Yt = mt μt* Wt/Yt where mt is the mortality rate, μt* is the ratio of the average wealth of decedents (corrected for gifts inter vivos) relative to the average wealth of the living, and Wt denotes total personal wealth, or Bt/Wt = mt μt*

  14. Mortality and μ

  15. Decompositioon Piketty on France: “the historical decline in the mortality mtseems to have been (partially) compensated by an increase in the μt* ratio. Consequently, the product of the two, that is the inheritance-wealth ratio bwt = mtμt*, declined much less than the mortality rate”. In the UK, from 1977 to 2006, the rise in the B/Y ratio by a factor of 1.69 can be seen as the product of 0.75 (mortality decline) 1.23 (rise in μ*) and 1.83 (rise in W/Y). In the earlier upturn, from 1921 to 1932, by a factor of 1.54 can be seen as the product of 1.06 (slight mortality increase) 1.03 (virtually constant μ*) and 1.41 (rise in W/Y).

  16. 4. Comparison with France

  17. France

  18. Comparison

  19. Decomposition change 1977 to 2006 Note: Each cell shows the ratio of the 2006 value to that in 1977, so that B/Y in France in 2006 was 2.39 times the value in 1977.

  20. Conclusions • Estate data for UK not go so far back in time, although more frequent in recent years; • Knowledge about gifts inter vivos much less satisfactory in UK; and adjustments approximate; • Have seen recent rise in B/Y but less than in France (unless increase in gifts under-stated); • Rise in UK mostly driven by rise in W/Y; • Also U-shape in first third of C20; • Need to interpret recent U-shape in light of changing net worth of public and corporate sectors.

  21. More urgency for reforming wealth transfer tax

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