Growth, inequality, and social welfare: Cross-country evidence

David Dollar, Tatjana Kleineberg, Aart Kraay 19 November 2014

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Concerns about inequality are at the forefront of many policy debates today. From speeches by US President Barack Obama to the bestselling book Capital in the Twenty-First Century by Thomas Piketty, it is hard to escape the view that rising inequality poses major challenges in advanced economies. In the developing world too, much has been written about the adverse effects of high and rising inequality on the pace of poverty reduction.

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Topics:  Poverty and income inequality

Tags:  Inequality, social welfare, economic growth

High marginal tax rates on the top 1%

Fabian Kindermann, Dirk Krueger 15 November 2014

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Recently, public and scientific attention has been drawn to the increasing share of labour earnings, income, and wealth accruing to the so-called ‘top 1%’. Robert B. Reich in his 2009 book Aftershock opines that: “Concentration of income and wealth at the top continues to be the crux of America’s economic predicament”. The book Capital in the Twenty-First Century by Thomas Piketty (2014) has renewed the scientific debate about the sources and consequences of the high and increasing concentration of wealth in the US and around the world.

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Topics:  Labour markets Poverty and income inequality Taxation

Tags:  tax, tax rates, marginal tax rates, Income tax, wealth tax, Inequality

Monetary policy and long-term trends

Charles A.E. Goodhart, Philipp Erfurth 03 November 2014

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Introduction

There has been a long-term downward trend in the share and strength of labour in national income, which is depressing both demand and inflation. This has prompted ever more expansionary monetary policies. While understandable, indeed appropriate, within a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance (leverage).

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Topics:  Financial markets Macroeconomic policy Monetary policy

Tags:  monetary policy, Inequality, debt, leverage, wages, labour share, globalisation, consumption, propensity to consume, fiscal policy, Ageing, interest rates, investment, asset prices, housing, house prices, exchange rates, global crisis, mortgages, sub-prime crisis, Macroprudential policy, structural reforms, balance sheets, deleveraging, equity, shared-equity mortgages, Help to Buy

Home prices since 1870: No price like home

Katharina Knoll, Moritz Schularick, Thomas Steger 01 November 2014

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For economists there is no price like home – at least not since the global financial crisis. Fluctuations in house prices, their impact on the balance sheets of consumers and banks, as well as the deleveraging pressures triggered by house price busts have been a major focus of macroeconomic research in recent years (Mian and Sufi 2014, Jordà et al. 2014, Shiller 2009).

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Topics:  Economic history Financial markets

Tags:  housing, house prices, global crisis, land prices, transport costs, transport revolution, land-use restrictions, zoning laws, Inequality

Exploding wealth inequality in the United States

Emmanuel Saez, Gabriel Zucman 28 October 2014

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There is no dispute that income inequality has been on the rise in the US for the past four decades. The share of total income earned by the top 1% of families was less than 10% in the late 1970s, but now exceeds 20% as of the end of 2012 (Piketty and Saez 2003). A large portion of this increase is due to an upsurge in the labour incomes earned by senior company executives and successful entrepreneurs. But is the rise in US economic inequality purely a matter of rising labour compensation at the top, or did wealth inequality rise as well?

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Topics:  Poverty and income inequality

Tags:  wealth inequality, wage inequality, Inequality

Offshoring and skill-biased technical change

Daron Acemoglu, Gino Gancia, Fabrizio Zilibotti 30 September 2014

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Offshoring, the demand for skill, and biased innovations

The rapid rise of offshoring has been one of the most visible trends in the US labour market over the last three decades. Despite its prevalence, the implications for wages and skill premia are still debated (see, for instance, Grossman and Rossi-Hansberg 2008 and Baldwin and Robert-Nicoud 2014).

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Topics:  International trade Labour markets Poverty and income inequality Productivity and Innovation

Tags:  offshoring, skill-biased technical change, Inequality, wages, technological progress, innovation

Finance sector wages: explaining their high level and growth

Joanne Lindley, Steven McIntosh 21 September 2014

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Individuals who work in the finance sector enjoy a significant wage advantage. This wage premium has received increasing attention from researchers following the financial crisis, with focus being put onto wages at the top of the distribution in general, and finance sector wages in particular (see Bell and Van Reenen 2010, 2013 for discussion in the UK context). Policymakers have also targeted this wage premium, with the recent implementation of the Capital Requirements Directive capping bankers’ bonuses at a maximum of one year of salary from 2014.

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Topics:  Financial markets Microeconomic regulation

Tags:  Bankers’ bonuses, banking, wages, Inequality, UK, regulation, asymmetric information, Executive compensation, Finance, task-biased technological change, ICT

Endowments for war in 1914

Avner Offer 19 September 2014

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World War I was a mistake. Its consequences were not part of anybody’s expectations (excepting Stead and Bloch 1899) – certainly not of those who set it off, although there was an undertone of fatalism in their decisions (Offer 1995). If one side had possessed an unassailable superiority, then there would have been no call for war. The war’s duration indicates that the sides were matched, that the outcome was uncertain, and that instigating war was therefore a colossal gamble – and, as it turned out, a bad one. The decisions for war were irresponsible, incompetent, and worse.

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Topics:  Economic history Energy

Tags:  WWI, World War I, war, imperialism, nationalism, energy, Agriculture, technology, technological change, innovation, conscription, Inequality, rationing

Volatile top income shares in Switzerland? Reassessing the evolution between 1981 and 2009

Reto Foellmi, Isabel Martínez 31 August 2014

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The evolution of inequality in income and wealth has attracted substantial attention in recent decades. Academics have been trying to capture the relation between distribution and growth patterns – most recently and prominently Piketty (2014) in his widely discussed book Capital in the Twenty-First Century. Research on income distributions has notably focused on the top of the earnings distribution, in particular because changes in the very top incomes account for a large part of overall inequality in quantitative terms.

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Topics:  Europe's nations and regions Poverty and income inequality

Tags:  Switzerland, Inequality, income inequality, wealth inequality

Inheritance flows in Sweden, 1810–2010

Jesper Roine, Henry Ohlsson, Daniel Waldenström 08 August 2014

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Thomas Piketty’s book Capital in the Twenty-First Century (Piketty 2014) has received enormous attention since its publication. A fundamental question raised is whether a person’s lifetime income is the result of his or her own efforts or, alternatively, founded on inheritance. Even for those who believe that inequality does not matter as long as it is based on one’s own effort, the potential of a return to high levels of inequality based on inheritance is a totally different matter. To many people, such a development would be much less acceptable than increased inequality per se.

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Topics:  Economic history Europe's nations and regions Poverty and income inequality

Tags:  Sweden, Inequality, inheritance, wealth, capital, capital accumulation

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