The remarkable and large difference between the ONS [UK Office for National Statistics] estimates of wealth inequality and Piketty’s (and in fact all other) estimates may be due to a distinct ways to calculate wealth, especially pension wealth. The latest ONS 2010-2012 wealth estimates use new discount factors to estimate the discounted value of future defined pensions benefits. Using these new factors to recalculate pension wealth for the 2006-2008 and the 2008-2010 estimates lowers estimated pension wealth from 430 to 189 billion respectively from 677 to 322 billion, i.e. a decline of over 50% (see link, table 7.3).
As another chapter of the ONS study shows that, despite these recalculations, pension wealth has a relatively unequal distribution (see table 2.5) the downscaling of pension wealth due to the use of a new discount factor will lead to a lower estimate of inequality.
This of course shows the difficulty of estimating capital and wealth. A little note about this:
Capital (physical capital) can be estimated by: ....
The point: we have to take care to point out how we estimated (real) capital and (financial) wealth.
Real-World Economics Review Blog
Why are the ONS estimates of wealth inequality so low?
Merijn Knibbe
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