Study: Net worth of the household sector: A Canada–United States comparison, 1970 to 2012
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Canadian household net worth per capita reached 77% of the United States' level in 2012, according to a new study, "Net Worth in the Household Sector, 1970 to 2012: A Canada–United States Comparison," released today in the Economic Analysis Research Paper Series.
The report compares household net worth per capita in Canada and the United States from 1970 to 2012 using data from the Canadian national balance sheet accounts and the Flow of Funds published by the United States Federal Reserve.
Relative comparisons using purchasing power parities
Canadian household net worth per capita averaged 60% of US net worth between 1974 and 2006. The sharp drop in US home prices after 2007 reduced net worth per capita significantly in the United States. At the same time, Canadian net worth per capita declined modestly. As a result, Canadian net worth per capita rose to 77% of US net worth per capita by 2009, and it stayed relatively stable until 2012. Relatively stronger Canadian housing values contributed to this increase.
Despite the flat trajectory of relative net worth through the 1974 to 2006 period, there was an increase in the upward trend of net worth per capita within Canada and the United States during the 1990s. The increase appeared first in Canada, followed by the United States. Moreover, the acceleration appears more permanent in Canada as the United States reverted to values more consistent with those of the 1970s and 1980s after 2007. The study notes, however, that accompanying the trend acceleration is an increase in the amplitude of the variability of net worth per capita.
Decomposing changes in net worth
The study also reports that synchronized changes in the prices of financial assets, particularly share prices, produce annual net worth changes that are correlated between Canada and the United States. Intermittently, however, non-financial assets can make large contributions to changes in net worth between the two nations. One such occurrence was the 2007 collapse of the US housing bubble. These intermittent contributions are important for explaining why significant changes can occur in Canadian net worth per capita relative to that of the United States. Household debt was not found to be a major source of year-to-year changes in net worth in either country.
The research paper "Net Worth of the Household Sector, 1970 to 2012: A Canada–United States Comparison", part of the Economic Analysis Research Paper Series (Catalogue number11F0027M), is now available from the Browse by key resource module of our website under Publications.
Similar studies are also available in the Update on Economic Analysis module of our website.
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