Where do billionaires live, and why? We took the Forbes list for 2015 and analyzed it statistically. Hong Kong and Sweden have by far the highest billionaire densities.
Forbes’ list covers more than 1000 billionaires with wealth over $1.8 billion in 2015. The map below shows where the wealth resides based on the citizenship of the billionaires.
We summed up each country’s billionaire wealth and divided it by total national wealth (approximated using Piketty’s data). This ratio is a measure of billionaire density.
Hong Kong and Sweden have by far the highest billionaire densities.
The global billionaire-to-national-wealth index is 1.2%.
What drives high billionaire density? We do not know, but we know what does not drive it (tested statistically):
- One could think that the size of the home country would be beneficial since a large home market would easier open up wealth-creation opportunities. However, it is not.
- One could also believe that low tax rates would make it is easier to become a billionaire in a country. Total tax rate does not influence billionaire density though.
Note that while Sweden has the second highest total tax rate in the world, the tax on wealth is negligible. There is no wealth tax, property tax, or inheritance tax, and gifts are tax free.
We also looked at the wealth inequality among billionaires. The graph below shows that the Lorenz curve for billionaires: the lower arched curve. The Gini coefficient is the green area between the diagonal and the Lorenz curve.
The billionaire Gini coefficient comes out at 0.44 (Gini is 0 for perfect equality, 1 for perfect inequality). This is the wealth Gini, not the more familiar income Gini.
A country’s total wealth Gini is typically in the 0.7 to 0.8 range*. Thus, it would seem that there are no lumpenbillionaires.
Finally, we hypothesize that there are two factors that lead to high billionaire density:
- Economic vitality. The top countries on the billionaire density index often show high levels of innovation, creativity and entrepreneurship, have a penchant for risk taking, and a relentless urge to increase value added. Sweden being the best example.
- Laws favoring the wealthy. The tax system in Sweden and the creation of the oligarch class in Russia are examples.
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* Wealth Gini carries no meaning since people can have negative wealth. This makes it possible to have a negative Gini coefficients, or coefficients larger than 1. So the 0.7-0.8 numbers mentioned may be meaningless, but arguably the effect of negative wealth is small.
- The title is derived from the song Home on the Range: “Oh, give me a home where the buffalo roam…”
- The gold coin is by King Croesus of Lydia, famous for his wealth.
- Lumpenproletariat is Karl Marx’s term for the working class that has no self awareness and thus will never rise in a revolutionary struggle.
- Travie McCoy describes the benefits of being a billionaire: Billionaire.