Martin Ravallion, Shaohua Chen, 15 November 2021

China’s political leadership recently committed to expanding the proportion of middle-income groups to create a less polarised, and more ‘olive-shaped’, distribution of wealth. This column considers the potential trade-offs between reducing income polarisation and other goals, including poverty reduction. An obvious concern is how the process of economic growth impacts the extent of polarisation, but the country’s historical record does not point to any serious trade-offs going forward, including with economic growth, poverty reduction, and overall social welfare.  However, potential trade-offs would need to be considered further in the context of specific policy efforts, such as expanding social service coverage in rural areas.

Ethan Ilzetzki, 18 August 2021

By most measures, income inequality has increased in the UK in the past several decades. The July 2021 CfM survey asked the members of its UK panel to evaluate the impact of central banks on inequality and whether the Bank of England should consider income and wealth distribution in its monetary policy decisions. The majority the panel thinks monetary policy has only a small impact on wealth and income inequality. A larger majority of nearly 90% of the panel believes that inequality should play a minimal role or no role in the Bank of England’s monetary policy decisions.

Martin Ravallion, 24 June 2021

Surveys are an often unreliable method for measuring top incomes, due largely to low compliance rates among rich households. This column proposes a way to correct for selective compliance. Using the geographic distribution of survey-response rates to calculate how the household-level probability of agreeing to be interviewed varies with own-income and other covariates, the method improves on ad hoc approaches to reweighting survey data. A behavioural micro model of compliance can more accurately reveal top income recipients, thereby updating tax records and refining redistributive policies.

Niklas Amberg, Thomas Jansson, Mathias Klein, Anna Rogantini Picco, 23 May 2021

Fully understanding the distributional consequences of monetary policy requires looking at its impact over the entire income distribution and not simply at summary inequality measures like the Gini coefficient. Using uncensored administrative income data for Sweden, this column shows that while a monetary policy loosening substantially affects incomes across the entire income distribution, it does so relatively more in the tails, providing a U-shaped response pattern. The effects in the bottom are primarily driven by changes in labour income, whereas the effects in the top are mainly due to disparities in capital income.

João Tovar Jalles, Luiz de Mello, 22 October 2020

Widening income disparities and slow productivity growth in many countries have rekindled interest in the policies that can deliver strong and equitable growth in output and living standards. This column presents a chronology of inclusive growth episodes, defined as increases in GDP per capita without a concomitant deterioration in the distribution of household disposable income. These episodes are more likely to occur where human capital is high, tax-benefit systems are more redistributive, productivity grows more rapidly, and labour force participation is high. Trade openness and a range of institutional factors, including political system durability and electoral regimes, also matter.

Gianluca Violante, 31 July 2020

Most high earners bounce back from recessions. But Gianluca Violante tells Tim Phillips that, for the last 50 years, it has been a different story for low earners. 

Richard V. Burkhauser, Nicolas Hérault, Stephen P. Jenkins, Roger Wilkins, 21 July 2020

The share of total income held by those at the very top of the income distribution has been much analysed, but despite a rising share of women in the top 1% of the income distribution, less is known about the gender divide at the top. This column analyses gender differences among the UK top 1% between 1999 and 2015. The rising share of women in the top 1% is largely accounted for by women having increased the time they spend in full-time education by more than men did.

Anne Boschini, Jesper Roine, 29 January 2020

While the rising income share of top earners has received enormous attention in recent years, the share of women at the top has not been examined as closely. This column analyses income tax data from Sweden, where taxes are filed individually regardless of marital status. It finds that while the share of women among the wealthiest groups has steadily increased over time, women remain a clear minority, especially at the very top. Unlike top-income men, top-income women are much more likely to have partners who are also in the top of the income distribution.

Alexander Cappelen, Bertil Tungodden, 26 May 2016

What happens in the brain when something is fair or unfair? In this video, Alexander Cappelen and Bertil Tungodden present their research on the effects of fairness on our brains. Using fMRI technology, the neuroeconomics study shows that the brain reacts to unfairness. Income inequalities are perceived as fair if they reflect different work contributions. This video was recorded at the Choice Lab, Norwegian School of Economics, in Bergen.

Peter Petri, Michael Plummer, 30 April 2016

The Trans-Pacific Partnership faces a serious political challenge in the US, with some viewing it as primarily benefitting the wealthy. This column argues that it will slightly favour middle- and low-income US households, while also generating substantial benefits for poorer developing countries. As with any trade agreement, the gains and losses will be asymmetrically distributed, but the gains should permit ample support for individuals adversely affected.

Javier Cravino, Andrei Levchenko, 23 November 2015

Large exchange rate swings remain a prominent and recurring feature of the world economy. This column uses household consumption patterns to examine the distributional impact of the devaluation of the peso during Mexico’s ‘Tequila Crisis’. Cost of living increases are found to be 1.25 to 1.6 times higher for the poor compared to the rich. In the interests of equity, exchange rate policy should take account of such distributional impacts.

Jonathan Heathcote, Gianluca Violante, Fabrizio Perri, 02 February 2010

The unemployment rate has dominated economic headlines, but recessions raise numerous problems. This column warns that recessions raise earnings inequality and income inequality, absent mitigating government programmes. The current recession has indeed raised such inequality, but consumption inequality has surprisingly declined.

Xavier Sala-i-Martin, Maxim Pinkovskiy, 22 January 2010

World poverty is falling. This column presents new estimates of the world’s income distribution and suggests that world poverty is disappearing faster than previously thought. From 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa. Barring a catastrophe, there will never be more than a billion people in poverty in the future history of the world.

Events

CEPR Policy Research