Walter Scheidel, 02 September 2019

World War II sharply reduced income and wealth inequality in many countries. This column, part of a Vox debate on the economics of WWII, describes how various factors converged to produce this outcome. Mass mobilisation raised demand for labour and reduced skill premiums, extremely high marginal tax rates cut into elite incomes and fortunes, aggressive government intervention curtailed corporate and investment profits and sought to protect workers, consumers, and renters. Returns of capital fell as international markets suffered interruptions and physical assets risked confiscation or destruction. Communist regimes expanded their reach. In market economies, the war experience promoted reforms regarding social welfare, unionisation and taxation that sustained several decades of greater equality.

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