More Evidence of German Self-Mythologizing

A couple of weeks ago I mentioned that the recent stories about the Germans being poorer than the rest of Europe, and how it was largely bullsh%$?

Well, it appears that it was even more bogus than I had previously thought. You see the difference in household wealth is almost entirely due to difference in household sizes:

Media hype had been generated by the ranking of the countries’ median household wealth results, especially by the fact that:

• Germany was in last place with €51,400.

• Italy and Spain were significantly above France with wealth equal to €173,500 and €182,700 respectively, compared to the French households’ €115,800.

The mean household wealth averages paint a very different picture to current narratives about the relatively wealth of nations in the Eurozone. The relative dispersion in the estimates is much smaller: the German household mean is €195,200, while for France, Italy and Spain it is €233,400, €275,200 and €291,400 respectively. Moreover, Germany climbs six places in the wealth ranking.

As already noted by De Grauwe and Ji (2013), Germany’s position at the bottom of the median ranking is simply due to its large wealth inequality compared with the others. This is confirmed by observing that the concentration of wealth, measured by a Gini index of 0.76, is much higher in Germany, while for France, Italy and Spain the estimate is smaller (0.68, 0.61 and 0.58 respectively).

Household Size Matters

This analysis does not take account of household composition in the various countries. The distribution of household wealth across countries is affected by differences in the demographic characteristics of households (age, education, household size):

• In northern countries, households are generally small, often composed of a single member.

• In the south it is not unusual to find many people, even from different generations (grandparents, parents and children), living together.

The splitting up of household members produces a sort of partition of wealth among the households they generate, as happens when young members exit the household to form a new family.

A simple way to sterilise for household size is to consider per capita averages:

• The per capita wealth figure for Italy and Spain is €108,700, slightly higher than for France (€104,100) and Germany (€95,500).

BTW, do you know one of the reasons that there are more multigenerational households in the Mediterranean Euro nations?

Because the generous social welfare system in Germany allows for generations not to live together. (Things like high quality government subsidized elder care and strong pensions).