The Distribution of Wealth in Israel – המכון לרפורמות מבניות

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Researchers: Maor Milgrom and Gilad Bar-Levav

We estimate the distribution of wealth in Israel for 2013. The results show that the richest percentile owns 22.5% of national wealth, equal to the share of the seven lowest deciles combined.

Abstract

This is the first study which measures the wealth distribution in Israel. We are basing our estimation on data from the Israeli Central Bureau of Statistics (CBS) survey of assets for the year 2013. Wealth is defined as the market value of all assets owned by households net of their debts. Due to low coverage of financial assets in the survey, we impute the missing values of pension funds based on age, life expectancy and income levels. We use methods developed by Davies and Shorrocks (2009) to fix the underrepresentation of rich households. These include adding data from “rich lists” provided by business magazines, and adjusting the tail of the distribution to fit the Pareto distribution, a common attribute of wealth distributions. The adjustment was done by running a Monte Carlo simulation. The results show that wealth inequality in Israel is significantly higher than the income inequality (Gini coefficients of 0.66 and 0.38, respectively), reaffirming findings in comparable studies. When measuring wealth inequality according to the Gini index, Israel ranks 9th out of the 19 developed countries. The top percentile in Israel holds 22.5% of all wealth, ranking Israel 6th in that category.

Main Results

  • Wealth inequality in Israel is significantly greater than income inequality. While the top decile owns 27% of national income, it holds 51% of the wealth.
  • A significant part of the wealth is concentrated in the top percentile. The richest 1% of the households own 22.5% of all the wealth, equal to the share of the seven lowest deciles combined.
  • With regard to wealth held by the top percentile, Israel ranks 6th out of the 19 developed countries. When measuring wealth inequality according to the Gini index, Israel ranks 9th.
  • The total national wealth of the households in Israel stands at 5.24 trillion NIS. The average wealth of households in Israel is 2.1 million NIS and wealth of the median household in Israel is 1.2 million NIS.
  • the average wealth of the household in the top decile stands at 10.8 million NIS, and the average wealth of the top percentile stands at 47.9 million NIS.
  • The wealth of Israel’s 500 richest people equals 7.4% of the national wealth.
  • 11% percent of Israeli households hold assets worth under 1,000 NIS. 5% of Israeli households have no assets or have negative wealth value, i.e., they have more debts than assets.
  • 17% of the population (approximately 425 000 households) are living in asset poverty, defined as a household whose net wealth does not cover the cost of the household’s basic needs for a period of three months.

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