Poverty and income inequality

Rachel Griffith, Peter Levell, Agnes Norris Keiller, 01 December 2020

On 31 January 2020 the UK formally left the EU after over 40 years of membership. On 31 December, the UK’s transition period will come to an end and the UK and EU will establish a new trading relationship with greater trade frictions. At the time of writing, the terms of this relationship remain unclear. However, since the EU is by far the UK’s largest trading partner, the implications for the UK economy are likely to be profound. This column discusses potential consequences for the labour market – and earnings inequality – in the UK.

Joshua Hausman, Paul W. Rhode, Johannes Wieland, 29 November 2020

Like the current economic crisis in the US, the Great Depression led to large redistributions of income among sectors and households. Perhaps most important, falling farm product prices shifted income away from farmers. This column argues that this redistribution explains between 10% and 30% of the US output decline in 1930. Recovery from the Great Depression began in 1933 in part because farm product prices rose, reversing this redistribution. 

Antoine Bozio, Bertrand Garbinti, Jonathan Goupille-Lebret, Malka Guillot, Thomas Piketty, 18 November 2020

How much can redistribution policies account for long-run changes in inequality? This column reveals that the reduction of inequality implied by redistribution is significant in France and the US and increased throughout the entire 20th century, but pre-tax income inequality appears to be the main factor accounting for the differential levels and trends in the two countries. These findings suggest that policy discussions on inequality should pay more attention to policies affecting pre-tax inequality and should not focus exclusively on redistribution.

Humberto Laudares, 03 November 2020

The existing literature on deforestation focuses on the environmental impacts. Using a novel panel dataset from Brazil, this column finds that deforestation is also playing a significant role in the transmission of COVID-19 to Indigenous populations, with one km2 deforested today estimated to result in 9.5% more new COVID-19 cases among Indigenous people in two weeks. In addition to being an environmental problem, deforestation is also a key health and economic issue, given the importance of curbing the spread of the COVID-19 to save lives and prevent an increase in inequality.

Roberto Iacono, Marco Ranaldi, 02 November 2020

The uneven distribution of wealth in society is commonly perceived as a matter of concern per se for inequality-averse policymakers. However, being wealth-poor or wealth-rich is also correlated with outcomes in the labour market. This column examines how wages and unemployment vary across the relative distribution of personal wealth in Norway, focusing on the wage-to-unemployment ratio across the different percentiles of the wealth distribution. It finds that wealth-poor individuals cannot escape low labour incomes regardless of the unemployment rate they face, while the unemployment elasticity of wages is substantially higher for wealth-rich individuals.

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