Housing v. Financial Wealth: a Cross-Country Comparison
This paper compares wealth portfolios across countries. The household sector in the US and Canada owns much more financial wealth, and much less housing wealth, than the household sector in most of Europe. We address this fact using a calibrated two sector growth model with endogenous financial contracts. Differences in demographics, geography, taxes and regulation go part of the way to explaining the fact, but a sizeable residual remains. We argue that this residual is consistent with cultural differences that shape attitudes towards uncertainty. We discuss survey evidence on such differences. We also explore whether their recent decline can account for the increasing similarity of wealth portfolios.