Distribution of wealth
The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or economic heterogeneity.
The distribution of wealth differs from the income distribution in that it looks at the economic distribution of ownership of the assets in a society, rather than the current income of members of that society. According to the International Association for Research in Income and Wealth, "the world distribution of wealth is much more unequal than that of income."
For rankings regarding wealth, see List of sovereign states by wealth inequality or list of countries by wealth per adult.
Definition of wealth
Wealth of an individual is defined as net worth, expressed as: wealth = assets − liabilitiesA broader definition of wealth, which is rarely used in the measurement of wealth inequality, also includes human capital. For example, the United Nations definition of inclusive wealth is a monetary measure which includes the sum of natural, human and physical assets.
The relation between wealth, income, and expenses is: change of wealth = saving = income − consumption. If an individual has a large income but also large expenses, the net effect of that income on her or his wealth could be small or even negative.
Conceptual framework
There are many ways in which the distribution of wealth can be analyzed. One common-used example is to compare the amount of the wealth of individual at say 99 percentile relative to the wealth of the median percentile. This is P99/P50 is one of the potential Kuznets ratios which is the inverted U shape that indicates the relationship between the inequality and the income per capita. Another common measure is the ratio of total amount of wealth in the hand of top say 1% of the wealth distribution over the total wealth in the economy. In many societies, the richest ten percent control more than half of the total wealth.The Pareto Distribution has often been used to mathematically quantify the distribution of wealth at the right tail ; stating that the upper 20% owns 80%, the upper 4% owns 64%, the upper 0.8% owns 51.2%, etc. In fact, the tail of wealth distributions, similar to that of income distribution, behaves like a Pareto distribution but with a thicker tail.
Wealth over people curves are a visually compelling way to show the distribution of wealth in a nation. WOP curves are modified distribution of wealth curves. The vertical and horizontal scales each show percentages from zero to one hundred. We imagine all the households in a nation being sorted from richest to poorest. They are then shrunk down and lined up along the horizontal scale. For any particular household, its point on the curve represents how their wealth compares to the average wealth of the richest percentile. For any nation, the average wealth of the richest 1/100 of households is the topmost point on the curve or or. In the real world two points on the WOP curve are always known before any statistics are gathered. These are the topmost point by definition, and the rightmost point or or. This unfortunate rightmost point is given because there are always at least one percent of households with no wealth at all. Given that the topmost and rightmost points are fixed... our interest lies in the form of the WOP curve between them. There are two extreme possible forms of the curve. The first is the "perfect communist" WOP. It is a straight line from the leftmost point horizontally across the people scale to p=99. Then it drops vertically to wealth = 0 at.
The other extreme is the "perfect tyranny" form. It starts on the left at the Tyrant's maximum wealth of 100%. It then immediately drops to zero at p=2, and continues at zero horizontally across the rest of the people. That is, the tyrant and his friends own all the nation's wealth. All other citizens are serfs or slaves. An obvious intermediate form is a straight line connecting the left/top point to the right/bottom point. In such a "Diagonal" society a household in the richest percentile would have just twice the wealth of a family in the median percentile. Such a society is compelling to many. In fact it is a comparison to a diagonal society that is the basis for the Gini values used as a measure of the disequity in a particular economy. These Gini values show the United States to be the third most dis-equitable economy of all the developed nations.
More sophisticated models have also been proposed.
Theoretical approaches
To model aspects of the distribution and holdings of wealth, there have been many different types of theories used. Before the 1960s, the data regarding this was collected mostly from wealth tax and estate tax records, with further proof gathered from small unrepresentative examinations and a variety of other sources. The results from these sources tended to show that the distribution of wealth was very unequal, and that material inheritance had a big role in the matter of wealth differences and in the transmission of the status of wealth from generation to generation. There was also reason to believe that the inequality in wealth was shrinking over time, and also the distribution's shape demonstrated particular statistical regularities that could not have been caused by coincidence. Thus, early theoretical work on the distribution of wealth wanted to explain the statistical regularities, and also comprehend the relationship of basic forces which could be an explanation for the concentration of wealth to be high and the trend of declining over time. John Maynard Keynes explored the impact of monetary policy on wealth distribution in A Tract on Monetary Reform.More lately, the research about wealth distribution has moved away from the worry with overall distributional characteristics, and in its place focuses more on the grounds of individual differences in the holdings of wealth. This change was caused partly because the importance of saving for retirement increased, and it is reflected in the vital role now assigned to the model of lifecycle savings developed by Modigliani and Brumberg, and Ando and Modigliani. Another important progress has been the increase in availability and finesse in sets of micro-data, which offer not just estimations of individuals' asset holdings and savings but also a variety of other household and personal characteristics that can assist in explain the differences in wealth.
Wealth inequality
Wealth inequality refers to uneven distribution of wealth among individuals and entities. Although most research depends on written sources, archaeologists and anthropologists often view large houses as occupied by wealthy households. The distribution of contemporaneous house sizes in a society then can regarded as a measure of wealth inequality. This approach has been used at least since 2014 and has shown, for example, that ancient wealth disparities in Eurasia were greater than those in North America and in Mesoamerica following the earliest Neolithic period.Global inequality statistics
A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned 1% of global wealth. A 2006 study found that the richest 2% own more than half of global household assets. The Pareto distribution gives 52.8% owned by the upper 1%.According to the OECD in 2012 the top 0.6% of world population or the 42 million richest people in the world held 39.3% of world wealth. The next 4.4% held 32.3% of world wealth. The bottom 95% held 28.4% of world wealth. The large gaps of the report get by the Gini index to 0.893, and are larger than gaps in global income inequality, measured in 2009 at 0.38. For example, in 2012 the bottom 60% of the world population held the same wealth in 2012 as the people on Forbes' Richest list consisting of 1,226 richest billionaires of the world.
A 2021 Oxfam report found that collectively, the 10 richest men in the world owned more than the combined wealth of the bottom 3.1 billion people, almost half of the entire world population. Their combined wealth doubled during the pandemic.
‘Global wealth Report 2021’, published by Credit Suisse, shows a substantial worldwide increase in wealth inequality during 2020. According to Credit Suisse, wealth distribution pyramid in 2020 shows that the richest group of adult population owns 45.8% of the total wealth. When compared to the 2013 wealth distribution pyramid, an overall increase of 4.8% can be seen. The bottom half of the world’s total adult population, the bottom quartile in the pyramid, owns only 1.3% of the total wealth. Again, when compared to the 2013 wealth distribution pyramid, a decrease of 1.7% can be observed. In conclusion, this comparison shows a substantial worldwide increase in wealth inequality over these years.
One of the main explanations for the ongoing increase of wealth inequality are the repercussions of the COVID-19 pandemic. Credit Suisse claims that the economic impact of the pandemic on employment and incomes in 2020 are likely to have a negative effect for the lowest groups of wealth holders, forcing them to spend more from their savings or incur higher debt. On the other hand, top wealth groups appeared to be relatively unaffected in this negative way. Moreover, they seemed to benefit from the impact of lower interest rates on share and house prices.
According to the ‘Global Wealth Report 2021’ published by Credit Suisse, there are 56 million millionaires in the world in 2020, increasing by 5.2 million from a year earlier. The biggest number of dollar millionaires is reported in the USA, with 22 million millionaires. This is far ahead of China, holding second place, with 9.4% of all global millionaires. The third place is currently being held by Japan, with 6.6% of all global millionaires.
The World Inequality Report 2026 stated that the wealthiest 0.001% alone—fewer than 60,000 individuals—control three
times more wealth than half of humanity combined.