## The Unequal COVID Saving and Wealth Surge

_IMF Blog, November 9, 2021_

## Source details

**Canonical URL:** [The Unequal COVID Saving and Wealth Surge](https://www.imf.org/en/blogs/articles/2021/11/09/the-unequal-covid-saving-and-wealth-surge)

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## Bibliographic details
- Authors: Cian Allen, Cyril Rebillard
- Published: November 9, 2021

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### Overview
- Household saving increased sharply during the COVID-19 crisis in many countries as lower consumption (from lockdowns or precaution) combined with an increase in disposable income from government transfers.
- Alongside saving, surging equity and housing prices made certain households substantially wealthier.
- The analysis uses US data published by the Federal Reserve and is presented as part of the IMF's External Sector Report.

### Methodology
- Changes in household net wealth are plotted by percentile and expressed as a ratio of total nationwide personal disposable income.
- Two comparison periods are used:
  - "Pandemic": between the end of 2019 and the second quarter of 2021.
  - "Normal times": between the end of 2014 and end of 2019.

### Key findings (quantified)
- The net wealth of the top 1 percent richest households rose by nearly 35 percentage points of the economy’s disposable income.
- Households in the bottom 50 percent experienced a modest 5-percentage-point increase in net wealth.
- The overall increase in net wealth, in percent of disposable income, was considerably larger during the pandemic than during normal times.

### Drivers of the increase
- Valuation changes due to booming equity and housing prices were a main driver.
- The “COVID saving surge” contributed, shown by a jump in “other assets,” including bank deposits.
- Government support—direct stimulus or support to firms—also contributed to higher disposable income and saving for households.

### Distributional dynamics and interpretation
- The overall increase in net wealth was unevenly distributed, with much of it accruing to people at the top of the distribution.
  - The equity price boom mostly benefited the rich.
  - Lockdowns more heavily affected spending on dining and travel, which are a larger part of wealthier households’ consumption habits, contributing to higher saving among those households.
  - Government support also tended to benefit the saving of wealthier households compared to poorer households that were more likely to spend the extra cash.
- Despite the uneven increases, the distribution of wealth across groups did not change much, as the increases in net wealth were relatively in line with the pre-pandemic shares in the wealth distribution.

### Implications highlighted
- Sharp asset price increases and differential saving behavior during the pandemic contributed to an outsized rise in wealth for the richest households relative to lower-income households.
- The composition of the wealth surge (valuation gains versus increased deposits/other assets) matters for which groups captured the gains.

*Source: The Unequal COVID Saving and Wealth Surge — Cian Allen, Cyril Rebillard; November 9, 2021.*

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## References

- [our recent External Sector Report](https://www.imf.org/en/Publications/ESR/Issues/2021/08/02/2021-external-sector-report)
- [How the Rich Get Richer](https://blogs.imf.org/2020/11/30/how-the-rich-get-richer/)
- [How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies](https://blogs.imf.org/2020/10/29/how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/)
- [When Inequality is High, Pandemics Can Fuel Social Unrest](https://blogs.imf.org/2020/12/11/when-inequality-is-high-pandemics-can-fuel-social-unrest/)

_Source: https://www.imf.org/en/blogs/articles/2021/11/09/the-unequal-covid-saving-and-wealth-surge_