Orsetta Causa, Mikkel Hermansen, 23 March 2018

Growing wealth inequality has become a key concern for economists, and tackling it requires a deep understanding of how tax and transfer systems affect the income distribution. Using OECD data, this column argues that taxes and transfers are less effective at reducing inequality today than they were in the mid-1990s. This drop in effectiveness has largely been driven by declining cash transfers, with a smaller, more heterogeneous role for personal income taxes.

Joan Rosés, Nikolaus Wolf, 14 March 2018

A recent literature has explored growing personal wealth inequality in countries around the world. This column explores the widening wealth gap between regions and across states in Europe. Using data going back to 1900, it shows that regional convergence ended around 1980 and the gap has been growing since then, with capital regions and declining industrial regions at the two extremes. This rise in regional inequality, combined with rising personal inequality, has played a significant role in the recent populist backlash.

Anna Stansbury, Lawrence H. Summers, 20 February 2018

Since 1973, there has been divergence between labour productivity and the typical worker’s pay in the US as productivity has continued to grow strongly and growth in average compensation has slowed substantially. This column explores the causes and implications of this trend. Productivity growth appears to have continued to push workers’ wages up, with other factors to blame for the divergence. The evidence casts doubt on the idea that rapid technological progress is the primary driver here, suggesting rather that institutional and structural factors are to blame.

Michael Bar, Moshe Hazan, Oksana Leukhina, David Weiss, Hosny Zoabi, 13 January 2018

Over recent decades, the trend for high-skilled, career-focused women to have fewer children, if any at all, has reversed. Using US data, this column shows that rising wage inequality is behind the reversal. Greater income inequality enables high-income families to outsource household production to lower-income people. Changes to minimum wage laws are thus likely to affect the fertility and career decisions of the rich.

Gene Amromin, Mariacristina De Nardi, Karl Schulze, 04 January 2018

A widening gap between rich and poor has been extensively documented for many countries and economies. This column explores how the wealth gap affects output and consumption changes in response to aggregate shocks. Lower- and higher-wealth households face different borrowing constraints, and have different marginal propensities to consume. Different levels of access to financial liquidity thus play a major role in the overall consumption dynamics during an economic downturn.

Trevor Burnard, Laura Panza, Jeffrey Williamson, 06 December 2017

Jamaica was considered to be exceptionally rich in the 18th century. Modern historians have tended to perpetuate this idea. This column uses novel methods to shed new light on living standards and inequality in colonial Jamaica. While the country was one of the most expensive places on the planet at the time, this wealth rested in the hands a very small white, slave-owning elite. The rest of the populace, many in slavery, lived at the very edge of subsistence.

Juergen Braunstein, Marion Laboure, 11 November 2017

Despite specialised press coverage, little is known about the potential wider socioeconomic implications of digital wealth management solutions. This column examines how ‘robo-advisors’ offer an opportunity to democratise finance and decrease wealth inequality. These algorithmic investment advisors stand to disrupt the wealth management sector through their ‘low-cost, accessible to most’ business models. However, the entrance of traditional wealth managers into the robo-advisor market could threaten this disruption.

Jorge Luis García, James Heckman, Duncan Ermini Leaf, María Prados, 25 August 2017

The costs and benefits of early childcare for working women and their children are hotly debated. This column explores the long-term benefits and costs of a programme in the US providing high-quality childcare services for disadvantaged families. The programme has a two-generation impact, improving mothers’ labour income, work experience, and education, as well as outcomes for the children. The results also suggest that the benefits of high-quality compared to low-quality formal care are higher for boys than for girls. Overall, the benefits more than recoup the costs.

Laurent Bach, Laurent Calvet, Paolo Sodini, 07 July 2017

A growing literature conjectures that wealthy households earn higher average returns, which can further exacerbate wealth inequality. Using Swedish administrative data, this column shows that the wealthy indeed earn higher returns on their asset portfolios. These high returns are primarily due to high levels of compensated risk. Households at the top of the wealth distribution further exhibit highly heterogeneous investment performance due to high levels of idiosyncratic risk.

Alberto Alesina, Stefanie Stantcheva, Edoardo Teso, 21 June 2017

Americans are generally thought to view the economic system as fair and see wealth as a reward for ability and effort, while Europeans tend to believe that the economic system is unfair, and that wealth is the result of circumstances. This column tests this using new evidence on beliefs about intergenerational mobility in four European countries and the US, and confirms that Europeans do indeed tend to be overly pessimistic about moving up the social ladder compared to reality, while Americans are overly optimistic. These perceptions have important implications for how redistribution and equal opportunity policies will be received.

Wolfgang Keller, Will Olney, 09 June 2017

Growing income inequality has been a hallmark of developed economies over the past few decades. Despite a large empirical literature exploring the determinants of this trend, to date few studies have explored the role of globalisation. Using US data on executive compensation, this column argues that while firm size, technology, and poor governance have all contributed to the growth in top incomes, globalisation is just as important in explaining the trend.

Ravi Kanbur, Yue Wang, Xiaobo Zhang, 15 March 2017

Sharply increasing inequality became an integral part of the narrative on Chinese development since the beginning of the reform process in 1978. Over the past decade, however, many studies have argued that inequality has been plateauing, or even declining. This column uses several datasets, including household surveys and regional-level government statistics, to show evidence of a mitigation of inequality in the early 21st century, and indeed, declining rates over recent years. Possible drivers of this turnaround are urbanisation, transfer and regulation regimes, and tightening rural labour markets.  

Alex Edmans, 23 September 2016

During political campaigns, candidates often set their sights on CEO compensation as a target for potential regulation. This column considers the various arguments for regulating CEO pay and questions whether it is a legitimate target for political intervention. Some arguments for regulation are shown to be erroneous, and some previous interventions are shown to have failed. While regulation can address the symptoms, only independent boards and large shareholders can solve the underlying problems.

Miguel Niño-Zarazúa, Laurence Roope, Finn Tarp, 20 September 2016

Since the turn of the century, income inequality has risen to be among the most prominent policy issues of our time. This column looks at inequality trends in recent decades. While relative global inequality has fallen, insufficient economic convergence, together with substantial growth in per capita incomes, has resulted in increased absolute inequality since the mid-1970s. The inclusivity aspect of growth is now more imperative than ever.

Douglas Campbell, Lester Lusher, 08 September 2016

Growing inequality has been one of the most pressing political issues since the Great Recession. However, there is a relative lack of consensus on the significant drivers of this trend. This column investigates the contribution of globalisation, via international trade, to US inequality. Although trade is found to have had important effects on certain parts of the US labour market in the early 2000s, the growth in US inequality since 1980 can be traced back to Reagan-era tax cuts.

Kurt Mitman, Dirk Krueger, Fabrizio Perri, 30 August 2016

Previous research found that income and wealth inequality had little impact on the aggregate dynamics of consumption, investment and output. This reinforced the idea that we can study downturns in the economy using representative agents. This column argues that household inequality affects both the depth of a recession and the welfare losses of those affected by it. Therefore we should explicitly measure and model household heterogeneity when we consider the impact of business cycle fluctuations and the welfare consequences of economic crises.

Suresh Naidu, Noam Yuchtman, 23 August 2016

Today’s labour market in the US has much in common with that of the late 19th and early 20th centuries. Then, as now, there were few government protections for workers, fears over cheap immigrant labour, rapid technological change, and increasing market concentration. This column explores the lessons that can be drawn from the earlier ‘Gilded Age’. The findings suggests that even as markets play a greater role in allocating labour, legal and political institutions will continue to shape bargaining power between firms and workers.

Dalia Marin, 23 June 2016

Income inequality is less severe in Germany than in the US. Part of this is due to CEO pay in the US growing faster than in Germany. This column offers some novel explanations for these observations. From the mid-1990s, Germany began offshoring managerial tasks to Eastern Europe, reducing demand for German managers. In addition Germany offshored skill-intensive jobs to Eastern Europe, reducing the skill premium.

Mikael Elinder, Oscar Erixson, Daniel Waldenström, 20 April 2016

The distributional effect of inherited wealth has been a long-standing question in economics. This column presents new evidence on the issue using population-wide register data from Sweden. The findings show that inheritances decrease wealth inequality but increase the absolute dispersion of wealth. The equalising effect of inheritances is diluted, however, by the fact that less wealthy heirs consume most of their inherited wealth, whereas wealthier heirs tend to save theirs. 

Julia Tanndal, Daniel Waldenström, 13 April 2016

Financial deregulation in the US has been shown to be associated with rising income inequality over the past four decades. This column looks at the income effects of financial deregulation in the UK and Japan during the 1980s and 1990s. As in the US, deregulation substantially increased the shares of income going to the very top of the distribution. These findings highlight the importance of financial markets in the evolution of income inequality in society. 



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