The share of pre-tax income flowing to the top of the UK income distribution is significantly higher than it was in the early 1980s. This column explains the nature of top incomes in the UK and how they are taxed. Overall, the authors argue, UK income taxes are progressive, with average tax rates rising with income. But incomes from business ownership and investment are taxed at lower rates than employment income. With a reformed tax base, there would be a strong case to align tax rates across different sources of income.
In 2022, consumer price inflation in the euro area has climbed to record highs. As a result, many households have increased their inflation expectations, thus increasing the risks of more persistent inflation in the future. Using the Bundesbank Online Panel Households as a laboratory, this column provides evidence that individuals who are shown ECB communication on the inflation outlook significantly reduce their inflation expectations. Furthermore, explaining the outlook verbally has a substantially larger effect than merely providing numerical projections.
Inequality statistics come with a lag relative to growth statistics. This column presents new real-time inequality statistics for the US, synchronised with growth statistics, which show that all income groups recovered their pre-crisis pre-tax income level within 20 months of the beginning of the Covid-induced recession. Covid-related transfers drastically but temporarily increased disposable incomes for the bottom 50%, well above their pre-Covid levels. Real wages experienced significant gains at the bottom of the distribution, highlighting the equalising effects of tight labour markets.
How temperature dynamics affect the economy is key to understanding the impact of climate change on monetary policy. This column presents new evidence that local temperature fluctuations had aggregate effects on the US in the last 50 years. Results show that US-wide temperature shocks, constructed by weighting unexpected county-level temperature variations, reduced both GDP and consumer prices, inducing an expansionary monetary policy reaction and a revision of the Federal Reserve’s economic forecasts.
Environmental, social, and governance metrics are receiving increasing attention as a measure of corporate performance. This column uses cross-sectional data to assess the prevalence and impact of including such metrics in executive compensation schemes. Usage of ‘ESG pay’ has grown rapidly in the past decade, with over 30% of firms including ESG metrics in their key performance indicators in 2021. It is more common in countries perceived to be sensitive to ESG concerns. Firms adopting ESG pay do receive more favourable ESG scores from rating agencies, but the impact on shareholder wealth is ambiguous.
Other Recent Columns:
- Adapting to flood risk: Evidence from global cities
- Deciphering monetary policy shocks
- Mainstream media and electoral outcomes
- The role of venture capital and governments in clean energy
- The Russia-Ukraine war, European financial integration, and crises
- Transatlantic economy policy responses to the pandemic and the road to recovery
- Macroeconomic costs of conflict: Impact on GDP and refugee flows
- River pollution: Combating cross-border externalities
- Variability in the impacts of COVID-19 on student achievement
- Large firms react more strongly to macro shocks, and it matters
- Neighbourhoods won’t be improved by banning the unemployed
- The long-run labour market effects of the Canada–US Free Trade Agreement
- Parsing disagreement about future short-term interest rates
- Ruble payments: Shielding the ruble from financial sanctions
- Measuring Ukraine’s private consumption during the war
- The crime effect of refugees
- Winter is coming: Energy policy towards Russia
- Public versus secret voting in committees
- The impact of foreign sanctions on firm performance in Russia
- How to design carbon pricing schemes
Most Read
Blogs&Reviews
Vox eBooks
Fink, Ménière, Toole, Veugelers, 13 July 2022
Vox Talks
Events
-
22 - 23 August 2022 / Palais Coburg, Vienna, Austria / WU Vienna University of Economics and Business Research Institute for Capital Markets (ISK)
-
23 - 25 August 2022 / Online /
-
29 - 31 August 2022 / Barcelona Spain / Central Bank Research Association (CEBRA)
-
7 - 8 September 2022 / Roma Eventi, Congress Center, Pontificia Università Gregoriana Rome, Italy / European Center of Sustainable Development , CIT University
-
11 - 14 September 2022 / Basel University / Verein fue Socialpolitik/Basel University
