Wednesday, October 17, 2012

The Distribution of Wealth

A friend of mine posted this picture on his Facebook showing the distribution of wealth in the United States.

The part of the graph I want to focus on is the actual distribution of wealth.  I have seen many such graphs in the past mostly from progressive authors promoting the idea that government needs to do something to equalize wealth.  The framing of such articles seem to often imply that wealth distribution in the United States is completely out of step with the rest of the world and that we need to be more like Europe which would serve to equalize things.  With this in mind, I started wondering just how wealth was distributed in other parts of the world.  Finding this information was more difficult than I thought it would be.  I did finally come across this 2008 paper which provides the wealth distribution for a number of different (mostly European) countries.  Here is the most useful table from the report.

Note: This information pertains to wealth distribution, not income distribution.  Second, I really hate the word distribution when discussing such things since it can leave the a reader who is unfamiliar with economics with the idea that wealth is 'distributed'.  Keep in mind that the word distribution here is being used as it would be when discussing statistics.

I don't much care for how the information is presented so here are some pie charts for various countries listed in the above table (I'm better at working with pie charts than bar graphs so this is what you get).

Here is the wealth distribution from the first bar graph presented as a pie chart for comparison purposes.

Obviously the data is somewhat dated but as I said above, it was the best information I could find.  If anyone knows of another source please leave a comment with a link.

Based on the above information, it doesn't look as if the United States is all that different than other parts of the world.  Obviously the U.S. is at the higher end of the spectrum with the top 20% having 84% of the wealth but in other parts of the world the rich command a somewhat similar share of wealth.  This is not all that surprising to me as it seems to follow the Pareto Principle (also known as the 80-20 rule).

What is somewhat surprising is Denmark.  For some reason there bottom 40% seem to have negative wealth (especially the bottom 20% with -17.3%).  This is very interesting since I have always been under that impression that Denmark has a massive welfare system.  It is certainly worth further investigation.