Faculteit Sociale Wetenschappen Departement Sociologie Two sides of the same coin? An investigation into the joint distribution of income and wealth and its applications to the analysis of poverty, inequality and redistribution Proefschrift voorgelegd tot het behalen van de graad van doctor in de Sociaal-Economische Wetenschappen aan de Universiteit Antwerpen te verdedigen door Sarah Kuypers Promotors: Prof. Dr. Ive Marx Dr. Gerlinde Verbist Antwerpen, 2018 Doctoral jury: Prof. Dr. Ive Marx (Supervisor, University of Antwerp) Dr. Gerlinde Verbist (Supervisor, University of Antwerp) Prof. Dr. Bruno De Borger (Chair, University of Antwerp) Dr. Eva Sierminska (Luxemburg Institute of Socio-Economic Research) Prof. Dr. Bruno Peeters (University of Antwerp) Prof. Dr. John Hills (London School of Economics and Political Science) Acknowledgements “If you are the smartest person in the room, then you are in the wrong room”. I read this famous quote by Confucius at the start of my PhD and it has since then always stayed with me. Luckily, I had the privilege of being surrounded by numerous persons smarter than me who guided and supported me throughout the PhD trajectory. I would like to take this opportunity to thank these important persons. First and foremost I am highly grateful to my supervisors Ive Marx and Gerlinde Verbist. Ive, thank you for subtly nudging me in the direction of an academic career when I was in my Master’s degree. You believed in my potential before anyone else did and suspected that the topic of wealth would be a good fit for me. Throughout the years I learned a lot from you about how to position my work into the broader academic literature and socio-economic realities. Gerlinde, thank you for introducing me into the wonderful world of microsimulation and EUROMOD, without which this dissertation would not have been the same. I very much enjoyed our trips to conferences and workshops in among others New York, Dresden, Copenhagen and Vienna. Ive and Gerlinde, thank you both for shaping me into the researcher I am today. You have been inspirations, guides and helpful critics throughout the PhD process. Most importantly, thanks for believing in me even when I didn’t myself and for providing me with positive affirmations when I needed them the most. I also thank the members of my PhD commission and jury. I am thankful to Bruno De Borger and Eva Sierminska for reading and commenting on earlier versions of my PhD. I enjoyed discussing my work with you and your insights have largely improved the content of this dissertation. I would also like to express my gratitude to Bruno Peeters and John Hills. I feel honoured that you are willing to be part of my PhD jury and that you have taken the time in your busy schedules to read and discuss my dissertation. A word of appreciation also goes out to Francesco Figari. As co-author of several of the chapters included in this PhD you have contributed largely to the final quality of the research. I learned a lot from your expertise and it was/is a pleasure to work with you. During my PhD I had the privilege of working among talented and friendly colleagues. A special thanks goes to Bea Cantillon. As professor in the Bachelor and Master programme of Social and Economic Sciences she has taught me a lot about the welfare state and social policy and as president of the Herman Deleeck Centre for Social Policy she has created a comfortable and stimulating work environment. I also thank Bea for being an inspiration for young female researchers to try to break through the glass ceiling. I am also indebted to Koen Decancq, who was one of my supervisors in the early days of my PhD. Koen, thanks for all the helpful advice and for challenging me to think and rethink my work. Thanks also for the enthusiasm when my work gets published. I am also in particular thankful to Sarah Marchal for helping me find my way when I just started at the CSB and for being my office buddy for the last 2 years. Thanks for allowing me to vent now and again on my frustrations and insecurities and for reading and commenting on the introduction and conclusion of this dissertation. Also thanks to Lien Van Cant, Jonas Boone and Johannes Derboven for the nice collaboration. Finally, I thank all current and former colleagues for making the CSB such a pleasant and inspiring work place, I learned a lot from all of you. i I would like to acknowledge funding received for the projects in which I was able to carry out the research that led to this PhD, namely from the Belgian Science Policy Office (BELSPO), the National Bank of Belgium and the Joint Research Centre of the European Commission in Seville. I thank our research partners within the CRESUS project for the nice collaboration, namely André Decoster and Kevin Spiritus from the University of Leuven and Sergio Perelman, Justina Klimaviciute and the rest of the team from the University of Liege. I am also indebted to members of the Eurosystem Household Finance and Consumption Network and the EUROMOD consortium who have established the framework on which the empirical analyses of this dissertation are based. While perhaps not always realising it my friends and family have also helped me morally in completing this dissertation. Naomi, Uschi, Glynis, Els and Tom; I am very lucky to have such good friends by my side. I always enjoy our little get-togethers to take my mind off the PhD and to just enjoy life. I also appreciate the support and encouragements received from my aunts, uncles, cousins and my sweet grandmother. Thank you all for positively contributing to my life. Finally, the most special thanks goes out to those who matter most in life: my parents and sister. Without your unconditional love, support and encouragements I would not have been able to finish this PhD. Melissa, thanks for being my sister, best friend and partner in crime. I admire you for being such a beautiful person. Through your work with people with a disability you have contributed much more to making our society a better place than any dissertation would ever be able to do. Mom, Dad, I am infinitely grateful that you have given me all opportunities in life and that you have always supported me in my decisions. Thank you for raising me to be an independent person, for teaching me to never give up but also for being my safety net in difficult moments. Words are simply not enough to express how grateful I am. ii Table of contents INTRODUCTION ....................................................................................................................................... 1 Income, wealth and their relation ....................................................................................................... 1 The importance of income and wealth throughout history ................................................................ 2 The effects of income and wealth on well-being ................................................................................ 4 Contributions and outline of the dissertation ..................................................................................... 6 PART 1. SETTING THE SCENE ................................................................................................................... 9 Chapter 1. The truly vulnerable: integrating wealth into the measurement of poverty and social policy effectiveness ........................................................................................................................... 11 1.1 Introduction ............................................................................................................................. 11 1.2 A joint income-wealth perspective on social policy ................................................................ 12 1.3 Data and methods ................................................................................................................... 13 1.4 Income and wealth in Belgium ................................................................................................ 15 1.5 Asset portfolio composition .................................................................................................... 18 1.6 Characteristics of households in triple precariousness ........................................................... 21 1.7 Conclusion and policy discussion ............................................................................................ 23 PART 2. DATA AND METHODS ............................................................................................................... 25 Chapter 2. The Eurosystem Household Finance and Consumption Survey: A new underlying database for EUROMOD .................................................................................................................... 27 2.1 Introduction ............................................................................................................................. 27 2.2 The opportunities of the HFCS data for microsimulation purposes ........................................ 28 2.3 Assessing the potential of HFCS as EUROMOD input database .............................................. 29 2.4 Constructing an HFCS database for EUROMOD ...................................................................... 34 2.5 Simulating net incomes using the HFCS data .......................................................................... 37 2.6 Conclusion ............................................................................................................................... 39 Annex