J.Bourdieuetal. -Reviewof Agriculturaland EnvironmentalStudies,87(2008-2),5-25 Wherehave(almost)all the wealthy gone? Spatialdecomposition of wealth trendsin France,1820-1939 Jérôme BOURDIEU*, MartaMENÉNDEZ**, GillesPOSTEL-VINAY***, Akiko SUWA-EISENMANN* *ParisSchool of Economics(INRA),Paris **UniversitéParis-Dauphine,PlaceduMaréchaldeLattredeTassigny,F-75775Pariscedex16, France;ParisSchool of Economics(INRA) e-mail:[email protected] *** ParisSchool of Economics(INRA)etEHESS, Paris Summary –Thispaperexaminesthe evolution of wealthdistribution in Franceduring the urbanization process of the nineteenthcentury,based on acomprehensivedatasetof individualinheritances.Itpresents aspatial decomposition between ruraland urbanareas,distinguishing Parisfrom othercities.Weuseanon-parametric approachbased on wealthdensity functions.Changesin the level of wealthexplained most of the spatialevolution of wealthduring 1820-1939;atthe turnofthe century however,the effectof urbanization on wealthdistribution increased gradually. Keywords: wealthdistribution,decomposition,semi-parametricand nonparametricmethods Oùvontlesrichesses?Décomposition spatiale despatrimoinesen France,1820-1939 Résumé –Cetarticle analysel’évolution de ladistribution de larichesseenFrancedurantle processus d’urbanisation entre1820 et1939,àpartird’une basededonnéesindividuellesde successions.Nous exploronsladimension géographiquedel’évolution de larépartition despatrimoinesen distinguantParis, lesautresvillesetlesterritoiresruraux.Nous utilisonsdestechniquesde décompositionsnon paramétriquesetde micro-simulationspour mesurerl’importancedelacroissanceéconomiqueetde l’urbanisation dansl’accumulation dupatrimoine. Leschangements dansle niveaude richesseexpliquent une grande part de l’évolution de larépartition de larichessependanttoutelapériode entre1830 et1939, tandisquel’effetde l’urbanisation sur ladistribution dupatrimoine augmenteàlafin du19e siècle. Mots-clés: répartition dupatrimoine,décomposition,méthodessemi-paramétriquesetnon para- métriques Descripteurs JEL :C14,J11,H20,O18 5 J.Bourdieuetal. -Reviewof Agriculturaland EnvironmentalStudies,87(2008-2),5-25 1. Introduction The period between the earlynineteenthcentury and the Second World Warwasone of considerable structuralchangesin France. Onceruraland mainlyagricultural,it progressivelyturned intoanindustrialand urbanized country.While less thanone fifthofthe population lived in townsaround 1800,morethanone half did in the 1930s.Thispaperstudieschangesin privatewealthdistribution thatparalleled these structuralchanges,withafocus on geographicaldifferences,between ruraland urban areas,and among the latter,between Parisand othercities. The evolution of income distribution during the process of developmentfrom an agriculturaleconomytoanindustrialone hasbeen modeled in the dualframeworkof A.W.Lewis(1954). Inthatframework,Kuznets (1955) conjectured thatariseinthe proportion of individualsemployed atahigherwage in the modernsectorwould lead first torising and then tofalling overall inequality (the so-called Kuznets ‘inverted-U’ curve). Keyassumptionsrelated on the proportion of individualsemployed in each sector,the degree of inequality within sectors,and the differencebetween the mean incomesacross sectors. Extending Kuznet’sconjecturetowealthdistribution isnotstraightforward. Indeed,asafirst approximation,the evolution of wealthshould besimilartothatof income,perhapswithatime lag(sincewealthcould beconsidered asastockresulting from accumulated flows of income). However,wealthcanalsobeindependentfrom income forvarious reasons.First,alarge part of wealthisinherited and depends thereforenotonlyon one’sownlife-cycle earnings.Next,specificshocksmightaffect wealthmorethanincome,suchasinflation leading todifferentiated valuation of assets orwardestructions.Moreover,wealthismoreconcentrated thanincome. The top of the distribution ownsmost of the totalamountof wealth. Thus,usualindicators such asmeansaresensitivetowhathappensatextreme levels,whichmightbenot representativeofotherparts of the wealthdistribution. Thiscaveatextendstoscalar inequality indicesbased on means.Atthe otherend,people mightearnaliving without detaining anyassets.Actually,according tothe datasetused in thispaper,only around one half of the population owned wealth. Moreprecisely,the shareof individualsleaving aninheritancedecreased overtime:ashigh as68% of all decedents in 1820-47,itdropped to54% in 1919-39(Bourdieu etal.,2003). Thesezerovalues must betaken intoaccount,the moresobecausetheirevolution overtime could be related tothe same structuralchangesthataffected the amounts of wealth. Despitethesedifficulties,asmall numberof casestudieshavenevertheless examined the long-runevolution of the wealthdistribution during the process of development.Inthe United States,afterarelativelyegalitariancolonialera, wealth inequality increased and then decreased in three steps,during the Civil War(for Southerninequality),during WWI and,most of all,after1929(Williamson and Lindert,1980). ForBritain,Atkinson and Harrison (1978) havealsofound falling wealthinequality afterWWI.Using Swedishdataforthe period 1873-2005,Roine and Waldenström (2007)showed thatwealthconcentration wasalreadyhigh in the agrarianstate;anincreaseinwealthconcentration occurred during industrialization 6 J.Bourdieuetal. -Reviewof Agriculturaland EnvironmentalStudies,87(2008-2),5-25 but itwassmall and limited tothe top percentile. Thesestudieshoweverleaveaside the problem of the zerowealth. Inthe caseofFrance,Daumard(1973)studied estatesin fivecities(Paris,Lille, Lyon,Bordeaux and Toulouse) atthree points in time overthe period 1815-1914. She showed that,overall,the amounts of wealthincreased and the fivecitiesstudied by Daumarddid notevolveinthe same way.Lille seemed tohavebenefited most from industrialization in termsof capitalaccumulation,and Toulousethe least.InParis,the wealthiest of all Frenchlived side byside withthoseinextreme poverty.Another recentpapershedslighton the long-runevolution of the top percentile of wealth holders in France(Piketty etal.,2006). Wealthconcentration increased during the nineteenthcentury upuntil WWI, driven bylarge industrialand financialestates: the shareoftotalwealthheld bythe richest percentile of the population grewfrom 43.4% in 1807 to54.9% in 1914. The riseininequality did notslowdownafter 1870,especiallyin Paris.The decline afterWWI wasabruptand mostlydriven by exogenous shocks. Thispaperstudiesthe spatialdistribution of wealthinthe nineteenthcentury and first half of the twentiethcentury.Wedepart from previous studiesin three ways. First,weconsidernotonlywealthowners but alsothosewho do notleaveany inheritance. Second,wecontrol forthe influenceofextreme valueson means.We choosethe ratherdrasticoption of getting rid of the top percentile. Indeed,the trajectory of the top percentile doesnotnecessarilyreflectwhathappened tothe great majority of the Frenchpopulation. The weightof the top percentile in the total amountof wealthcrushesand masksevents atmoremodest but perhapsmore representativewealthlevels:thoseofordinary people. Third,wegobeyond summary indicessuchasmeansorscalarindicesof inequality.Weuseanon parametric decomposition approachinordertoestimatethe role of urbanization and the rural- urbanwealthgapinexplaining changesin the wealthdistribution. Our method follows the line of Jenkinsand VanKerm(2005) adapted forwealth asin Jenkinsand Jäntti(2005). Contrary tothe latter,wedonotencounterthe problem of negativewealth,asthe definition used in thispaperisgross assets,in estatesregistered forfiscalpurpose. Changesin the density function of wealthare decomposed in twoelements,one thataccounts forchangesin the amounts of wealth and anotherelementthataccounts forchangesin the spatialstructureofthe population. The latterelementactuallyrepresents bothurbanization process and the factthatthe shareofwealthowners did notevolveinthe same wayin ruraland urbanareas.Changesin the amountof wealth,in turn,arealsodecomposed between changesin the meanwealths(the rural/urbanwealthgap) and changesin the formof the distribution. The sizeofeachelementismeasured byasummary indexand is compared,between them and overtime. Our results suggest thatchangesin wealthdistribution in Franceweredominated during the nineteenthcentury bythe change in the numberof assetowners (decreasing overtime) and the rural/urbanwealthgap. The period between the end of nineteenth century and WWII sawagrowing importanceofurbanization and changesin the shape of the distribution. Wealthownership increased in Paris,but notenough to 7 J.Bourdieuetal. -Reviewof Agriculturaland EnvironmentalStudies,87(2008-2),5-25 overcome the generaldrop observed in otherareas.Putting togetherthe evolution of wealthowners and thoseleaving no inheritance,our results suggest apolarization of Frenchsociety in the long run. The structureofthe paperisasfollows.The next section presents the datasetused. Section 3describesour non-parametricdecomposition of changesin the wealth distribution,whichallows forabroad-brushidentification of the relevantsourcesof distributionaltrends.Section 4analysesthe spatialdecomposition of wealth distribution in Francefrom 1820 to1939and discussesthe contribution of the differentfactors in the observed changesin the distribution of wealth. The last section concludes. 2.Dataand definitions The datasetcomesfrom the TRA-wealthsurvey,based on Frenchestatetaxreturns (Bourdieu etal.,2003). Since1791,the Frenchtaxadministration hascollected the totalamounts of wealthofall decedents fornearlyall