Poverty and income inequality

Sreevidya Ayyar, Uta Bolt, Eric French, Jamie Hentall MacCuish, Cormac O’Dea, 05 May 2021

The children of rich families tend to go to better quality schools, have higher cognitive skills, and complete more years of schooling. This column exploits unique data from the National Child Development study to determine these early childhood factors go on to have long-run impacts on an individual’s lifetime earnings, perpetuating a cycle of wealth. These results suggest that policies that equalise investments, such as improving school quality, could promote income mobility.

David Klenert, Marc Fleurbaey, 28 April 2021

The social cost of carbon is a monetary metric for the damage caused by the emission of an additional tonne of CO2. Previous literature has shown that accounting for inequality between countries significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. Using a model that features heterogeneity both between and within countries, this column demonstrates that climate and distributional policy can generally not be separated. In particular, it shows that a higher social cost of carbon may be called for globally under realistic expectations of existing inequality.

Paolo Acciari, Facundo Alvaredo, Salvatore Morelli, 24 April 2021

Growing wealth disparities can have corrosive effects on equality of opportunity when they crystallise over time and turn into persistent disparities across generations. This column uses newly assembled data from Italian inheritance tax records to show that the wealth share of the top 1% (half a million individuals) increased from 16% in 1995 to 22% in 2016, and the share accruing to the top 0.01% (the richest 5,000 adults) almost tripled from 1.8% to 5%.  In contrast, the poorest 50% saw an 80% drop in their average net wealth over the same period. The data also reveal the growing role of inheritance and gifts inter vivos as a share of national income, as well as their increasing concentration at the top.

Aroop Chatterjee, Léo Czajka, Amory Gethin, 24 April 2021

Many studies have investigated the dynamics of poverty and consumption in developing countries, but still little is known about the distribution of household net worth. This column documents the persistence of extreme wealth inequalities in South Africa since the end of the apartheid regime. Today, the top 10% own about 85% of total wealth and the top 0.1% own close to one third. A progressive wealth tax targeted at the richest 1% could collect the equivalent of between 1.5% and 3.5% of South Africa’s GDP, both tackling this legacy of extreme inequality and bringing additional government revenue in the wake of the COVID-19 crisis.

Shamena Anwar, Patrick Bayer, Randi Hjalmarsson, 23 April 2021

In the justice system, the jury is meant to be representative of the community. Yet, juries across the US are often highly unrepresentative, especially for racial minority populations. Using data from Harris County, Texas, this column examines how unequal representation impacts verdicts and sentences. Many zip codes with the highest proportion of white residents are overrepresented on juries. If the jury pool were more reflective of the county, the average sentence would fall by almost 15 years for Black defendants and the likelihood of a life sentence by more than 50%. Policy responses could include expanding the jury source list and oversampling residents from underrepresented neighbourhoods in calls for jury duty.

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