Poverty and income inequality

Oriol Aspachs, Ruben Durante, José García-Montalvo, Alberto Graziano, Josep Mestres, Marta Reynal-Querol, 22 September 2020

The economic crisis from the COVID-19 pandemic may disproportionately affect the most vulnerable segments of the population, creating serious challenges for social cohesion and political stability. This column constructs a high-frequency measure of income inequality using anonymised data from bank records on the wages and public transfers of over three million account holders in Spain. Wage inequality increased by almost 30% during the COVID-19 crisis, mainly due to job losses and wage cuts for low-income workers. However, public transfers were very effective at offsetting most, though not all, of this increase.

Ravi Kanbur, 21 September 2020

From the public discourse, it seems clear that we are living in an age of rising inequality. However, common measures of income and consumption inequality disguise a more nuanced pattern of inequality change across the world. This column argues that inequality within countries has not been rising everywhere and that inequality between countries has decreased. At the same time, technological progress is increasingly displacing basic labour in favour of skilled labour and capital, across borders, and widening the wage gap. The overall effect is unclear. National policies to mitigate inequality are needed but, in the absence of international cooperation, are constrained by cross-border spillovers.

Brian Nolan, Juan C. Palomino, Philippe Van Kerm, Salvatore Morelli, 19 September 2020

Whether and how much intergenerational transfers contribute to wealth inequality is still subject to debate. This column analyses household survey data on inheritance and gifts inter vivos in France, Germany, Great Britain, Ireland, Italy, Spain, and the US to relate current household wealth levels and inequality to the receipt of intergenerational wealth transfers. In these countries, large transfers increase overall wealth inequality. Strengthening taxation capacity and instating lifetime capital acquisitions tax for gifts and inheritances may help counter the dis-equalising effect of intergenerational transfers.

Arun Advani, Felix Koenig, Lorenzo Pessina, Andy Summers, 17 September 2020

Top incomes have grown rapidly in recent decades and this growth has sparked a debate about rising inequality in Western societies. This column combines data from UK tax records with new information on migrant status to show that that migrants are highly represented at the top of the UK’s income distribution. Indeed, migration can account for the majority of top-income growth in the past two decades and can help explain why the UK has experienced an outsized increase in top incomes.

Debopam Bhattacharya, Renata Rabovic, 15 September 2020

The balance between merit and diversity in university admissions is a controversial issue, but statistical analysis is challenging because applicant characteristics are only observed by admissions officers and post-entry test scores are only available for those who were admitted. This column uses a novel, outcome-based test of merit-based admissions at Cambridge University, where some applicants enter via a second-round clearing mechanism from a ‘pool’, to bypass the non-observability problems. The test reveals robust evidence of higher admissions standards for men in STEM and economics, and weak evidence of the same for private school applicants. The gender gap is non-evident in law and medicine.

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