Analyzing Net Amount vs Gross Assets and Debts: A More Accurate Approach to Assessing Wealth Differences

Instead, the experts suggest splitting the net amount into gross assets and debts and looking at their combined impact. In addition, the wealth effects should be analyzed using a specific statistical approach (“Generalized Additive Models”).

“In a simulation study, we were able to show that this approach describes systematic differences in wealth more precisely and at the same time avoids finding patterns in the data that are not there,” says study author Nora Müller.

The researchers have already used the new approach to reanalyze wealth differences in educational attainment in the United States. This showed that looking at net worth can actually lead to an incorrect prediction.

In the study, it was not the children with high net worth but the children with high gross wealth who had the best educational prospects, regardless of the level of debt. Children with low gross assets and low debt have the worst educational opportunities.

The study authors conclude that the results of the study are important for the analysis of social inequality and for the development of measures to promote educational opportunities for all children and young people.