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Income Inequality II

Income Inequality II. References. Gabriel Zucman , and Emmanuel Saez “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data”, Quarterly Journal of Economics, 2016, 131(2): 519-578

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Income Inequality II

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  1. Income Inequality II

  2. References • Gabriel Zucman, and Emmanuel Saez “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data”, Quarterly Journal of Economics, 2016, 131(2): 519-578 • Gabriel Zucman, Thomas Piketty and Li Yang “Capital Accumulation, Private Property and Rising Inequality in China, 1978-2015”, forthcoming, American Economic Review. • FacundoAlvaredo, Gabriel Zucman, Lucas Chancel, Thomas Piketty and Emmanuel Saez“The Elephant Curve of Global Inequality and Growth”, American Economic Association P&P, 2018, 108: 103-108.

  3. References • 台灣貧富差距的真相 (https://www.twreporter.org/a/taiwan-wealth-inequality) • Inequality.org (https://inequality.org/facts/income-inequality/) • World Inequality Report 2018 (https://wir2018.wid.world/)

  4. Roadmap • Why do we study inequality? • Income inequality • Wealth inequality • Global inequality • Why does inequality grow?

  5. Measuring Inequality • Inequality matters because the public cares about it • ⇒Need to provide transparent inequality measures • Goals: Understand drivers of inequality trends and the effects of public policy on inequality

  6. Income and Wealth • Income is a flow = Labor income + Capital income • Capital income is the return on Wealth • Wealth is a stock accumulated from savings and inheritances

  7. WORLDWIDE INCOME INEQUALITY • Income inequality is growing within most countries • But large emerging countries (China, India) are catching up with advanced economies • Is global income inequality increasing or decreasing? • Hard question to answer due • lack of comparable data across countries • difficulty of measuring top incomes in surveys • In this paper, we use new consistent data from World Inequality Database (WID) to generate world inequality estimates since 1980

  8. WORLD INEQUALITY DATABASE • WID.world is the most extensive database on the historical evolution of income and wealth distribution (100+ researchers) • 100% transparent, open source, reproducible • Website started in 2011 with historical top income share series using tax data • New WID.world website launched 1/2017.

  9. WID.WORLD KEY NOVELTIES • We cover full distribution (not just the top), we use individual adult unit (with equal split of income among couples) • We distribute total National Income (not just fiscal income) ⇒ Brings together analysis of growth and inequality • Emerging countries added (China, India, Brazil, Russia)

  10. Constantly expanding database on the historical evolution of income and wealth with global coverage goal • Open access, multi-lingual website and visualization tools • Stata and R packages: access our data from Stata command “wid”

  11. Top Income Shares • Simple way to measure inequality: what share of total pre-tax market income goes to the top 10% families, to 1%, etc. • Individual income tax statistics are the only source • covering long-time periods • capturing well top incomes • 25 countries have been analyzed in the on-going World Top Incomes Database • Caveats: Income concept used is narrower than National Income and focus is solely on pre-tax, pre-transfer income

  12. Income Inequality

  13. Drop in Inequality in 1st Half of 20th Century • All advanced countries had very high income concentration one century ago (explains pessimism of Piketty 2014) • All countries experience sharp reduction in income concentration during the first part of the 20th century • This is primarily a capital income phenomenon • War and depression shocks hit top capital earners (drop follows each country specific history) • Government police responses-regulations and progressive income and inheritance taxation-make this drop permanent

  14. Recent Surge in Inequality • Driven by surge in top labor incomes which then fuels wealth inequality • Difference across countries rules out technical change and globalization as the unique explanations • Policies play a key role in shaping inequality (tax and transfer policies, regulations, education) • Key debate: do gains of the top 1% reflect productivity or do they come at the expense of the 99%?

  15. Wealth Inequality • Wealth inequality is always much higher than income inequality (bottom 50% families own about zero wealth) • Us government taxes 1/3 of market incomes to fund transfers and public goods: disposable income inequality lower than market income inequality

  16. Global Inequality

  17. Top 10% income shares across the world, 2016

  18. Top 10% income shares across the world, 1980‒2016

  19. Top 10% income shares across the world, 1980‒2016

  20. Top 1% income shares across the world, 1980-2016

  21. Bottom 50% income shares across the world, 1980‒2016

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