THE MACRO‐ECONOMIC WEALTH‐INCOME RATIO OF HOUSEHOLDS

André Babeau

Review of Income and Wealth, 1983, vol. 29, issue 4, 347-370

Abstract: The Wealth‐Income Ratio of households, although less known than the capital‐product ratio, has not been ignored by economic analysis. But most of the studies concerning this ratio put the stress on one unique cause of variation: the saving ratio of households. Doing so, they neglect other important factors such as the behaviour of households in incurring debt, and the influence of inflation on the variation of nominal income and on capital gains. This paper first provides a simple formula expressing the Wealth‐Income Ratio as a function of all these factors. Then it shows, using data from France and United States, that this relationship is a useful tool for analysing the observed evolution of the ratio. Finally, it comes back to the famous question of the “constancy” of the Wealth‐Income Ratio in the long run.

Date: 1983
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