Poverty and income inequality

Dalia Marin , 23 June 2016

Income inequality is less severe in Germany than in the US. Part of this is due to CEO pay in the US growing faster than in Germany. This column offers some novel explanations for these observations. From the mid-1990s, Germany began offshoring managerial tasks to Eastern Europe, reducing demand for German managers. In addition Germany offshored skill-intensive jobs to Eastern Europe, reducing the skill premium.

Fabienne Ilzkovitz, Adriaan Dierx, 19 June 2016

Firms with greater market power can behave monopolistically, and recent research suggests that declining market competitiveness is driving income inequality. While competition authorities already measure the overall impact of their interventions by using customer savings, these measurements do not account for indirect effects of intervention. This column introduces a DSGE model to model competition policy interventions as a negative mark-up shock. Competition policy has a significant and positive impact on growth and jobs, and impacts richer and poorer households differently. Interventions have important redistributive effects that benefit the poorest in society.

Brandon Dupont, Joshua L. Rosenbloom, 19 June 2016

The long-run persistence of social and economic status has received substantial attention from economists of late. But the impact of economic and political shocks on this persistence has yet to be thoroughly explored. This column examines the disruptions from the US Civil War on the Southern wealth distribution. Results suggest that an entrenched southern planter elite retained their economic status after the war. However, the turmoil of the decade opened mobility opportunities for Southerners of more modest means, especially compared with the North.

Peter H. Lindert, Jeffrey G. Williamson, 16 June 2016

Americans have long debated when the country became the world’s economic leader, when it became so unequal, and how inequality and growth might be linked.  Yet those debates have lacked the quantitative evidence needed to choose between competing views. This column introduces evidence on American incomes per capita and inequality for two centuries before World War I. American history suggests that inequality is not driven by some fundamental law of capitalist development, but rather by episodic shifts in five basic forces: demography, education policy, trade competition, financial regulation policy, and labour-saving technological change.

Giorgio Brunello, Guglielmo Weber, Christoph Weiss, 15 June 2016

Early life conditions can have long-lasting effects on individual development and labour market success. Using a sequence of reforms that raised the minimum school-leaving age in Europe, this column investigates how access to books at home influences educational and labour market outcomes. The returns to an additional year of education for individuals brought up in households with few books are much lower than for the luckier ones who had more than a shelf of books at home.

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