One-dimensional indicators such as GNI per capita are known to be flawed measures of wellbeing. The Human Development Index (HDI) introduced dimensions of health and education alongside income. This column argues that an HDI adjusted for inequality and hours worked gives deeper insight into a country's economic standing. Using this composite measure, the US falls from first to seventh among G8 countries.
Thorvaldur Gylfason, 22 August 2016
Roy Van der Weide, Christoph Lakner, Elena Ianchovichina, 11 August 2016
Household income surveys underestimate income inequality because they fail to capture top incomes. A popular solution is to combine the household survey with data from income tax records, though for countries like Egypt these records are not available, leading to an underestimate of inequality. This column argues that data on house prices can instead be used to estimate the top tail of the income distribution. Using this method the Gini index for urban Egypt increases from a survey-based figure of 0.36, which suggests that it is one of the world’s most equal countries, to 0.47.
Maleke Fourati, Gabriele Gratton, Pauline Grosjean, 14 July 2016
It is typically argued that the rising popularity of Islamist parties in parts of the Arab world reflects votes from the poor and disenfranchised. This column challenges this perspective, arguing that Islamist parties gain political support from the middle classes, due in large part to neoliberal economic policies. Using survey and electoral data from Tunisia, it shows that belonging to the middle class and living in a rich district together affect the decision to vote for the religious party more than actually being religious. These findings suggest that the same framework used to analyse political competition in the West can be fruitfully applied to the Muslim world.
Ghazala Azmat, Rosa Ferrer, 12 July 2016
Gender gaps in earnings exist in high-skill industries despite male and female workers having similar educational backgrounds. This column uses evidence from the legal industry to assess how performance affects career outcomes across genders. Performance gaps, defined by hours billed and new revenue raised, explain a substantial share of the gender gaps in earnings, as women’s working hours are affected by having young children while those of men are not. An important implication is that gender-based inequality in earnings and career outcomes might not decrease in the near future as more high-skilled workers are explicitly compensated based on performance.
James Harrigan, Ariell Reshef, Farid Toubal, 06 July 2016
Job polarisation has been documented in many large developed economies over the past two decades. This column shows how the growth of ICT has contributed to these trends. Using French firm-level data, it documents the declining share of middle-wage jobs, and identifies an increase in the share of technology-related jobs as an important contributing factor. Firms with more ‘techies’ are also found to grow faster than less techie-intensive firms.
Wolfgang Keller, Hâle Utar, 05 July 2016
Recent shifts in political sentiment regarding EU membership have been caused in part by a growing hostility towards globalisation. This column uses Danish evidence to analyse whether globalisation causes a polarisation of jobs in developed countries, and in particular whether it causes a loss of middle-income jobs. Rising import competition can increase income inequality, but it also accounts for a substantial part of all high-wage employment gains. The task for policymakers is to make these gains felt by the majority of citizens.
Daron Acemoglu, Pascual Restrepo, 05 July 2016
Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and 2007. As long as the rate of automation of jobs by machines and the creation of new complex tasks for workers are balanced, there will be no major labour market decline. The nature of new technology, and its impact on future innovation potential, has important implications for labour stability.
Janet Currie, Hannes Schwandt, 02 July 2016
Inequalities in mortality rates are a good indicator of economic wellbeing, but most of the existing literature does little to distinguish between developments in infants and adults. This column uses extensive US data to analyse mortality trends across all age groups. It finds that the health of the next generation in the poorest areas of the US has improved significantly and the race gap has declined significantly. Underlying explanations include declines in the prevalence of smoking and improved nutrition, and a major cause is social policies that target the most disadvantaged.
Fabienne Ilzkovitz, Adriaan Dierx, 19 June 2016
Firms with greater market power can behave monopolistically, and recent research suggests that declining market competitiveness is driving income inequality. While competition authorities already measure the overall impact of their interventions by using customer savings, these measurements do not account for indirect effects of intervention. This column introduces a DSGE model to model competition policy interventions as a negative mark-up shock. Competition policy has a significant and positive impact on growth and jobs, and impacts richer and poorer households differently. Interventions have important redistributive effects that benefit the poorest in society.
Brandon Dupont, Joshua Rosenbloom, 19 June 2016
The long-run persistence of social and economic status has received substantial attention from economists of late. But the impact of economic and political shocks on this persistence has yet to be thoroughly explored. This column examines the disruptions from the US Civil War on the Southern wealth distribution. Results suggest that an entrenched southern planter elite retained their economic status after the war. However, the turmoil of the decade opened mobility opportunities for Southerners of more modest means, especially compared with the North.
Peter Lindert, Jeffrey Williamson, 16 June 2016
Americans have long debated when the country became the world’s economic leader, when it became so unequal, and how inequality and growth might be linked. Yet those debates have lacked the quantitative evidence needed to choose between competing views. This column introduces evidence on American incomes per capita and inequality for two centuries before World War I. American history suggests that inequality is not driven by some fundamental law of capitalist development, but rather by episodic shifts in five basic forces: demography, education policy, trade competition, financial regulation policy, and labour-saving technological change.
Torben Andersen, Jonas Maibom, 29 May 2016
Theory and empirical data contest the direction of causality in the relationship between economic performance and income inequality – a relationship that is of great political importance. This column uses evidence from OECD countries to show that the relationship is not linear. While some countries can improve economic performance only at the cost of increasing economic inequality, other countries can improve both economic performance and equality without such a trade-off.
Gilles Duranton, Ejaz Ghani, Arti Grover Goswami, William Kerr, 27 May 2016
Optimising the allocation of factors of production improves productivity. In India, where evidence suggests land is severely misallocated to inefficient manufacturing firms, access to financing is disproportionately tied to access to land. This column examines the link between the misallocation of land and access to capital through financial markets. A very strong positive correlation emerges between the two, consistent with the fact that land and buildings can provide strong collateral support for accessing finance from the credit market.
Peter Egger, Sergey Nigai, Nora Strecker, 21 May 2016
Increased globalisation since the mid-1990s has eroded some of the tax bases of many economies. At the same time, demand for public goods has risen and governments face the challenge of financing greater public expenditure with lower tax revenues. This column discusses tax policy responses to increasing globalisation, showing that since the mid-1990s governments in OECD countries have increasingly relied on revenues from employee-borne rather than firm-borne taxes. Due to the greater mobility of capital and high-skilled workers, who are able to escape higher taxes more easily, the middle classes have carried much of the additional tax burden.
Clément Bosquet, Henry Overman, 29 April 2016
The effect of an individual’s place of residence on their life chances has long been discussed in public policy debates. This column uses British Household Panel Survey data to assess whether birthplace plays a role in determining future earnings. On average, an individual born in London in the 1970s will earn around 7% more than an individual of the same age and gender born in Manchester; who in turn will earn 5.5% more than an individual born in Cardiff. Parental sorting and the influence of birthplace in decisions about current location both play a role in explaining this effect.
Markus Poschke, Barış Kaymak, 17 April 2016
Recent decades have seen a remarkable increase in the concentration of wealth in the hands of the wealthiest in the US. This column examines which factors may have driven this increase. The evidence points to higher wage inequality, often attributed to new developments in the technology of production, as the main driving force, followed by tax cuts for top earners and more generous public transfers as secondary factors.
Andrea Garnero, Alexander Hijzen, Sébastien Martin, 21 March 2016
Some economists argue that income inequality suggests intra-generational mobility in society. This column provides comprehensive evidence across a large number of advanced economies on the importance of intra-generational mobility and its relationship with earnings inequality. The findings do not support the belief that higher earnings inequality necessarily goes hand-in-hand with greater mobility over the working life. Higher inequalities are not systematically compensated by higher mobility opportunities.
Jason Furman, 17 March 2016
The US is becoming ever more unequal. This column assesses the 2016 Economic Report of the President, highlighting that middle-class incomes are shaped by productivity growth, labour force participation, and the equality of outcomes. As the US economy moves beyond recovery from the Global Crisis, its policy stance should focus on promoting each of those factors to foster inclusive growth.
Joshua Aizenman, Yothin Jinjarak, Jungsuk Kim, Donghyun Park, 08 January 2016
Taxation in developing nations has always been difficult, but the Global Crisis has brought further complications. This column examines and compares the tax revenue trends in Asia and Latin America to shed light on some of these issues. Despite their similarities, there is no one-size-fits-all explanation for tax/GDP ratios between the two regions. While progress has been made, the gap between the advanced economies and developing countries offers ample room for improvement. This is particularly important for developing nations as they face growing demand for fiscal spending.
Martin Ravallion, 23 December 2015
With the new UN Global Goals agreed this autumn, the issue of poverty is at the top of global agenda. This column presents a new book that reviews past and present debates on poverty in both rich and poor countries. The challenges ahead are in assuring the political will and administrative capabilities to implement and enforce sound anti-poverty policies, and in adapting them to differing circumstances and evolving knowledge about their efficacy.