Poverty and income inequality

Melissa S. Kearney, Phillip B. Levine, 28 May 2015

Compared to other developed countries, the US ranks high on income inequality and low on social mobility. This could be particularly concerning if such a trend is self-perpetuating. In this column, the authors argue that there is a causal relationship between income inequality and high school dropout rates among disadvantaged youth. In particular, moving from a low-inequality to a high-inequality state increases the likelihood that a male student from a low socioeconomic status drops out of high school by 4.1 percentage points. The lack of opportunity for disadvantaged students, therefore, may be self-perpetuating.

Branko Milanovic, 06 May 2015

Our level of income is unarguably dependent on where we live in the world. But evidencing this is tricky. This column presents a model that explains global income variability using one variable only – where you live. The results suggest that we might want to reassess how we think about both economic migration and global inequality of opportunity.

Orazio Attanasio, Costas Meghir, Corina Mommaerts, 01 May 2015

The significance of informal sources of insurance against income risk has important consequences for the design of social insurance programs. A particular concern is that public programs simply crowd out informal institutions. This column uses US household data to investigate whether the extended family acts as such an informal institution. Although there is a large potential for the family to insure against income shocks, no such insurance occurs. 

Alan J Auerbach, Kevin Hassett, 03 March 2015

Piketty's justification for his proposed wealth tax relies on the notion that the rate of return on capital exceeds economic growth. This column challenges this basis, arguing that it fails to account for risk. The authors also examine the relative merits of a consumption tax, which may be more valid.

Montfort Mlachila, René Tapsoba, Sampawende Tapsoba, 21 February 2015

Despite the consensus that growth alone does not need to lead to better social outcomes, a formal quantification of the quality of growth is still missing. This column seeks to bridge this gap by proposing a new quality of growth index that captures both the intrinsic nature and the social dimension of growth. This index could legitimately be part of the benchmarking tools for guiding policies toward more inclusive growth.

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