Poverty and income inequality

Fernanda Estevan, Thomas Gall, Patrick Legros, Andrew Newman, 23 May 2017

In recent years, several US states have introduced college admission policies that reward local rather than global relative performance by guaranteeing admission to students graduating in the top N-percent of their high school. This column examines how these policies affected socioeconomic and ethnic segregation at both the university and high school levels in the state of Texas. While the policies did not replicate the level of diversity in universities seen under earlier affirmative action policies, they did lead to a reduction in the overall level of ethnic segregation in high schools.

Branko Milanovic, 16 May 2017

The capital–income ratio continues to rise. This increases interpersonal inequality when three conditions are met (as they are in all rich economies today): the rate of return to capital outstrips that of income, income from capital is concentrated among the rich, and the income source that is less equally distributed is correlated with overall income. This column argues that the third condition is not inevitable, and that policies to share income from capital more equally would decrease overall inequality. We have tools to do this, but policymakers lack the political will.

Giuseppe Berlingieri, Patrick Blanchenay, Chiara Criscuolo, 15 May 2017

Some firms pay well while others don’t; and some are highly productive while many aren’t. This column presents new firm-level data on the increasing dispersion of wages and productivity in both the manufacturing and services sectors in 16 OECD countries. Wage inequalities are growing between firms, even those operating in the same sector – and they are linked to growing differences between high and low productivity firms. Both globalisation and technological progress (notably information and communications technologies) influence these outcomes – as do policies and institutions such as minimum wages, employment protection legislation, unions, and processes of wage-setting.

Rui Luo, 14 May 2017

While the impact of modern technological change on the skill premium has been well explained, there has been no study of the evolution of the skill premium over the very long run. This column reveals that the skill premium in Western Europe declined between 1300 and 1600, and converged to a low and stable level afterwards. Growth and technological change, while stimulating economic development and the transition from a pre-modern era to modern era, reduced wage inequality between different working groups.

Timm Boenke, Markus M. Grabka, Carsten Schroeder, Edward Wolff, 10 May 2017

International comparisons of private household wealth place the US among the richest countries, whereas German households appear rather poor. This column argues that as these rankings are based on average household net wealth, they do not tell the whole story. An augmented wealth approach that adds social security wealth to net wealth reduces wealth inequalities in both countries and the wealth gap between the two. 

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