Housing and the Politics of Inequality: Homeowners as the New Wealth Owning Class in Western Europe.

Working paper - under review at West European Politics

Comparative political economy (CPE) has robustly examined the political and institutional determinants of income inequality. However, the study of wealth, which is more unequally distributed than income, has been largely neglected within CPE. Using an error correction model, we examine how economic, political and institutional dynamics move wealth-to-income ratios (which, we argue, can proxy movements in wealth distortions) in the short and long-run, within Western European and OECD countries. We find that the political and institutional determinants that affect income inequality have no short or long-run effects on the wealth-to-income ratio. Rather, the stock of wealth in society is driven by rising housing prices, as well as price changes in other financial assets, not home ownership or national saving rates. Hence, housing’s impact on wealth accumulation is driven solely by prices. We conclude by explaining what our results mean for generational cleavages and political conflict between baby- boomer home-owning incumbents, and millennial home-owning aspirers.