Wealth and Homeownership: Women, Men and Families PDF
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WEALTH AND HOMEOWNERSHIP Women, Men and Families Mariacristina Rossi Eva M. Sierminska Wealth and Homeownership Mariacristina Rossi • Eva M. Sierminska Wealth and Homeownership Women, Men and Families Mariacristina Rossi Eva M. Sierminska Department of Management, School of LISER - Luxembourg Institute of Management and Economics Socio-Economic Research University of Torino Esch-Belval, Luxembourg Torino, Italy ISBN 978-3-319-92557-8 ISBN 978-3-319-92558-5 (eBook) https://doi.org/10.1007/978-3-319-92558-5 Library of Congress Control Number: 2018943399 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans- mission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Abstract Bricks and Shadows © Stephen Bonk/Fotolia.co.uk This Palgrave Pivot imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland The journey of a thousand miles begins with one step. —Lao Tzu To Our Dads Foreword Interest in household finances amongst both academics and policymakers has been steadily growing over the past two to three decades. Furthermore, the global financial crisis highlighted the financial vulnerability faced by many households holding high levels of debt yet low, or even no, financial assets to draw upon in times of economic adversity. This book makes a valuable contribution to knowledge related to one of the key financial assets held by households, namely, their house—a financial asset, which provides shelter as well as serves as an important long-term financial investment. This timely book provides a comprehensive analysis of this complex dual characteristic of housing as both a consumption and an investment good. Furthermore, the detailed cross-country comparisons presented highlight the importance of the institutional context faced by households, as well as the implications of the changing welfare state. Such changes are related to the repeated warnings of a future pension crisis likely to be faced by many households who are not saving enough to safe- guard their financial future in retirement. This book thus, provides a timely reminder of the role of homeownership as a means to provide financial security later on in life, as well as the complex interaction between decisions regarding the holding of liquid and illiquid financial assets. Indeed, the nature of the portfolio of assets held at the household level has important implications for financial security in the face of potential shocks to health and employment, as well as for long-term financial planning. ix x Foreword The focus on gender and the changing nature of families provides a crucial context relating to the financial decision-making processes at play. Whilst issues related to the gender pay gap are rightly raised by the media, academia and policymakers, the gender wealth gap has attracted much less attention. This book places such issues related to wealth at the center of the analysis and debate. There are many reasons why such issues are important from a gender perspective including single families and the longer life expectancy of women relative to men. Indeed, the discussion on the changing nature of families presented in this book sheds light on this crucial, yet often overlooked, aspect of household finances. Thus, understanding the decision processes that lie behind wealth accumula- tion and homeownership are fundamentally important in understanding the gender wealth gap. Indeed, a related area covered by the book relates to the role played by financial knowledge and literacy, which in turn influence attitudes toward risk and risk aversion, thereby having impor- tant implications for financial decision making and inequalities in wealth. At a time when young people are struggling to get a foot on the hous- ing ladder in many countries and important decisions are made by young people regarding both financial and human capital investments, this book fills a crucial gap in our knowledge related to an asset, which some members of the older generations may take for granted, yet for some members of the younger generations, ownership of this asset appears somewhat aspirational and out of reach. This book is essential reading for anyone interested in household finances, an area which I have been researching since 2005. It provides insightful analysis of past research and important topical issues, as well as, highlights avenues to focus on in the future, and, in my opinion, will serve to stimulate further research and interest in the ever-growing literature on household finance. Sheffield, UK Sarah Brown Preface The importance of wealth has become more and more central in shaping households’ welfare. Particularly nowadays with the shrinking of welfare states and public pension provisions, private wealth can represent an important resource to draw upon in order to maintain the standards of living at the desired level after retirement. When looking at wealth and its composition, housing (principal residence, in particular) stands out as the biggest portion of wealth. In almost every country, wealth is predomi- nantly constituted by housing equity. Thus, looking at wealth while ignoring housing would be seen as a contradiction. Many books have been written on wealth; we ourselves have taken part in some research projects on wealth accumulation and its impact on household welfare and economic decisions. What has not been written yet is a book that sets the conceptual stage on these topics (wealth and housing) and provides a cross-national picture of wealth outcomes in this dimension for families (using newly available data) to be used by schol- ars, students and policymakers. The differences between women and men in wealth accumulation have been even more seldomly discussed. The idea of this book was to merge together what both of us have been working on for many years: the rationale behind wealth accumulation and the empirical outcomes. In other words, our goal has been to empha- size our expertise on wealth empirical analysis, with sound conceptual background to interpret the results. xi xii Preface In this book, we investigate the link between wealth and housing, the latter being a quite complicated decision per se. We begin the book by providing a conceptual framework within which the process of wealth accumulation and homeownership can be examined. We use this frame- work throughout the book. Next, we discuss the importance of studying wealth and housing wealth more generally and focus on the variation across countries. We also discuss why families and women and men in particular may differ in the way they accumulate wealth. Some methodological issues that accom- pany wealth studies are also pointed out. Chapter 3 follows homeownership trends in the developed world with a regional focus across families and elaborates on the determinants of homeownership. The final chapter investigates whether homeownership is associated with higher wealth levels, using regression analysis along with descriptive statistics. Despite not claiming causality, homeownership is associated with higher wealth. We conclude the chapter by pointing to possible drawbacks of wealth accumulation especially via housing equity. An excessively illiquid portfolio can act as a vulnerability effect, especially at old age. The book finishes by highlighting some of the potential drawbacks for families of having excessive levels of housing wealth. Creating this book was a lengthy process and we are grateful to every- one who helped us along the way, either directly or indirectly via inspira- tion. We would also like to thank the institutions LISER for supporting our work and the LIS datacenter for providing invaluable access and insights to the data. Torino, Italy Mariacristina Rossi Esch-Belval, Luxembourg Eva M. Sierminska
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