Andrea Asoni, Andrea Gilli, Mauro Gilli, Tino Sanandaji, 19 September 2021

There is a common perception that the US military predominantly recruits individuals from the most disadvantaged socioeconomic backgrounds with limited other career options. This column argues that this is no longer the case. Skill-biased technological change has led the US military to recruit more higher-skilled personnel since the 1990s, and while in 1979 the probability of joining the military was clearly higher for those with lower-than-average family income, for the 1997 cohort the probability was much more evenly distributed.

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.

Nikolay Angelov, Daniel Waldenström, 13 August 2021

The negative economic impact of the Covid-19 pandemic has received much attention, but less is known about its distributional consequences. This column presents new evidence on the pandemic’s inequality effects in Sweden using data on earnings and individual take-up of government Covid-19 support. The results show that income inequality increased during the pandemic, mostly due to layoffs and fewer working hours among low-income, part-time employees. The government’s support policies significantly dampened the increase in inequality but did not reverse it.

Martin Ravallion, 03 August 2021

Economists have long debated the most effective metrics for measuring poverty and inequality. This column presents analysis of the relative importance of three prominent macroeconomic indicators – the rate of unemployment, the inflation rate, and the growth rate of GDP per capita. Using evidence from the US, the author argues that higher unemployment rates unambiguously increase poverty measures, but that inflation matters more in the middle and upper-middle of the distribution than in the tails.

Paula Calvo, Ilse Lindenlaub, Ana Reynoso, 14 July 2021

While progress in closing gender gaps has been made, women around the world still earn less than men in the labour market. At the same time, income inequality across households has increased in recent decades. This column finds that the interaction of the marriage market and the labour market crucially impacts inequality across gender and within/between households. Policies that affect who marries whom (such as tax policies) or home production choices (such as parental leave or universal childcare) can mitigate or amplify inequality, calling for a better understanding of these spillovers across markets.

Alessandra Bonfiglioli, Federica De Pace, 25 June 2021

The rise in income inequality and, more prominently, in the wage gap between men and women has been one of the major concerns among policymakers and the public in recent years. This column presents new evidence from Germany on the impact of exports on the gender wage gap which shows that an increase in a plant’s exports significantly reduces the wage gap between male and female co-workers in white-collar occupations, but widens it for employees in blue-collar occupations. The findings suggest that designing policies that support women taking part in trade, especially in positions in which they would benefit from their comparative advantage, is crucial to maximise the potential benefits from globalisation.    

Niklas Engbom, Gustavo Gonzaga, Christian Moser, Roberta Olivieri, 07 June 2021

Relatively little is known about the patterns of inequality in developing countries, despite their importance for designing social and economic policies. This column analyses administrative and household data to describe the trends in earnings inequality and dynamics in Brazil since late 1980s. The findings suggest that the observed fall in earnings inequality and volatility may have been driven by the process of formalisation and other changes within the informal sector. 

Christian Bogmans, Andrea Pescatori, Ervin Prifti, 05 June 2021

Global food security is being threatened by the COVID-19 pandemic and the restrictive measures to control it. Jammed food supply chains, falling incomes for some population segments, and rising food prices are placing food out of reach for millions of individuals. This column discusses the short-run relationship between food (in)security and income and food prices, and the implications of the current economic crisis for global hunger. The pandemic’s economic fallout risks setting us back a full decade on eliminating undernourishment, especially in low-income countries. Governments should strengthen social safety nets for the most vulnerable to keep inequality in check.

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.

Michele Andreolli, Paolo Surico, 29 April 2021

What is the consumption response to unexpected transitory income gains of different size and what are the aggregate demand implications of stimulus packages that target different segments of the population? This column explores these questions using responses to hypothetical questions in the Italian Survey of Household Income and Wealth. Families with low cash-at-hand display a higher marginal propensity to consume out of small gains, while affluent households exhibit a higher marginal propensity to consume out of large gains. For a given level of public spending, a fiscal transfer of a smaller size paid to a larger group of low-income households stimulates aggregate consumption more than a larger transfer paid to a smaller group.

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.

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.

Asger Lau Andersen, Niels Johannesen, Mia Jørgensen, José-Luis Peydró, 19 April 2021

Who gains – and by how much ­– when central banks soften their monetary policy regime is a key policy question. This column discusses new evidence on the distributional effects of monetary policy based on detailed administrative household-level data. The authors show that the gains from lower policy rates exhibit a steep income gradient, with the increases in income, wealth, and consumption modest at the bottom of the income distribution and highest at the top. 

Evelina Björkegren, Mikael Lindahl, Mårten Palme, Emilia Simeonova, 11 March 2021

It is well documented that children from affluent families tend to be healthier than poor children, but distinguishing between the genetic and environmental causes of these health outcomes remains difficult. This column uses data from a large sample of Swedish children to compare those raised by their biological parents to adoptees. It finds that the link between parents’ education level and children’s long-term health is forged by mediating factors – from the formation of cognitive and non-cognitive skills to health-related life habits – and due primarily to investments in children’s human capital.

Roberto Iacono, Elisa Palagi, 27 February 2021

A crucial element in the study of wealth inequality is the difference between the rate of return and the growth rate of income. However, the focus on these measures at the aggregate level belies important heterogeneities along the wealth distribution. This column uses rich micro-data from Norway to show that wealthy households enjoy higher rates of return relative to growth, while the opposite is true for poorer household and the lower-middle-income class. It discusses policy implications of these findings for capital and wealth taxation in order to curb the rise of inequality. 

Alex Chernoff, Casey Warman, 02 February 2021

COVID-19 may accelerate the automation of jobs, as employers invest in technology to safeguard against pandemics. This column uses survey data from the US to show that women with medium to low levels of wages and education are at the highest risk of COVID-induced automation.

Pierre Dubois, Yassine Lefouili, Stephane Straub, 30 January 2021

Patients in the developing world often face prices for essential medicines far in excess of international reference levels, even if those drugs have lost patent protection. This column presents evidence from seven low- and middle-income countries with diverse drug procurement systems to assess the effect of centralised procurement on drug prices. The results of the study highlight that centralised procurement of drugs by the public sector leads to lower prices, but that the induced price reduction is smaller when the supply side is more concentrated.

Branko Milanovic, 29 January 2021

In classical capitalism, the rich earn their money from capital while the poor sell the value of their labour. In which countries is that still true, and how does it affect the gap between rich and poor? Branko Milanovic tells Tim Phillips about a new way in which we can think about inequality.

Pedro Carneiro, Italo Lopez Garcia, Kjell G. Salvanes, Emma Tominey, 24 January 2021

Parents’ income can affect a child’s earnings later in life but most empirical studies of intergenerational mobility collapse the childhood years into a single period. This column uses administrative data of all children born in Norway 1971–1980 to examine the relationship between adult outcomes of children and the timing of parental income over three periods of childhood: early (ages 0–5), middle (ages 6–11), and late (ages 12–17). Child success increases in households where parents’ income is higher in either early childhood or during adolescence. A balanced level of income across early childhood and adolescence may also improve the child’s success.

Barry Eichengreen, Balazs Csonto, Asmaa El-Ganainy, Zsoka Koczan, 14 January 2021

Global inequality has fallen in recent decades, but within-country inequality has risen in a significant number of national economies during the same period.  This column identifies the channels through which financial globalisation accentuates inequality and suggests how these could be mitigated by accompanying policies.  



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