Recent studies have established a causal link between trade and rising wage inequality. This column suggests there is also a pro-poor bias of trade. In moving from autarky to trade, the relative prices of goods consumed intensively by the poor, such as food, fall more. The gains from opening to trade are estimated at 63% for the 10th percentile of the income distribution and 28% for the 90th percentile.
Pablo Fajgelbaum, Amit Khandelwal, Saturday, November 28, 2015 - 00:00
Claudia Olivetti, M Daniele Paserman, Thursday, November 12, 2015 - 00:00
Intergenerational income mobility is currently not very high in the US compared to other developed countries. This column shows that US intergenerational income equality was high in the 19th century but plummeted between 1900 and 1920. The income-mobility ladder was thus pulled up during the so-called Great Gatsby era.
Florence Jaumotte, Carolina Osorio Buitron, Thursday, October 22, 2015 - 00:00
Inequality in advanced economies has risen considerably since the 1980s, largely driven by the increase of top earners’ income shares. This column revisits the drivers of inequality, emphasising the role played by changes in labour market institutions. It argues that the decline in union density has been strongly associated with the rise of top income inequality and discusses the multiple channels through which unionisation matters for income distribution.
Robert Z. Lawrence, Thursday, October 15, 2015 - 00:00
The US debate over income inequality in the 1980s and 1990s focused on the growing disparity between the earnings of the skilled, the unskilled and the super-rich. After the global crash, the decline in labour’s share of national income has been added to these concerns. This column presents an alternative explanation for this decline, arguing that limited substitution possibilities between capital and labour combined with the acceleration in the pace of labour-augmenting technical change raises the effective labour-capital ratio. The policy implications of this alternative explanation are profoundly different from those currently circulating.
Ravi Kanbur, Joseph Stiglitz, Tuesday, August 18, 2015 - 00:00
Growth theories traditionally focus on the Kaldor-Kuznets stylised facts. Ravi Kanbur and Nobelist Joe Stiglitz argue that these no longer hold; new theory is needed. The new models need to drop competitive marginal productivity theories of factor returns in favour of rent-generating mechanism and wealth inequality by focusing on the ‘rules of the game.’ They also must model interactions among physical, financial, and human capital that influence the level and evolution of inequality. A third key component will be to capture mechanisms that transmit inequality from generation to generation.
Philippe Aghion, Ufuk Akcigit, Antonin Bergeaud, Richard Blundell, David Hemous, Tuesday, July 28, 2015 - 00:00
In recent decades, there has been an accelerated increase in top income inequality, particularly in developed countries. This column argues that innovation partly accounts for the surge in top income inequality and fosters social mobility. In particular, the positive effect of innovation on social mobility is due to new innovators.
Bernardin Akitoby, Sanjeev Gupta, Abdelhak Senhadji, Saturday, July 18, 2015 - 00:00
There has been a heated debate about the effectiveness of fiscal policy as a countercyclical tool but little evidence on how it can support growth. This column shows that fiscal policy can lift medium- and long-term growth in both advanced and developing economies. But all fiscal reforms are not equal in their growth dividend. Successful reforms are often part of a broader reform package and can balance the growth-equity trade-off.
Matthew E. Kahn, Cong Sun, Siqi Zheng, Wednesday, July 8, 2015 - 00:00
China’s cities suffer from extremely high levels of air pollution, and Chinese consumers spend more than $US100 million on anti-smog products per year. Using recent internet sales data, this column explores how investing in such self-protection products varies for consumers with different income brackets. The urban poor are shown to be less likely to engage in this health-improving strategy. This suggests that cross-sectional income comparisons understate lifetime inequality.
Markus Brückner, Daniel Lederman, Tuesday, July 7, 2015 - 00:00
The relationship between aggregate output and income inequality is central in macroeconomics. This column argues that greater income inequality raises the economic growth of poor countries and decreases the growth of high- and middle-income countries. Human capital accumulation is an important channel through which income inequality affects growth.
Chie Aoyagi, Giovanni Ganelli, Kentaro Murayama, Wednesday, June 3, 2015 - 00:00
Income inequality in Japan has been growing over the past few decades. This column discusses the macroeconomic significance of inclusive growth and its role in the ultimate success of Abenomics. The findings suggest that full implementation of structural reforms – including launching the third arrow of Abenomics – would be necessary to foster growth and increase equality.
Melissa S. Kearney, Phillip B. Levine, Thursday, May 28, 2015 - 00:00
Compared with other developed countries, the US ranks high on income inequality and low on social mobility. This could be particularly concerning if such a trend is self-perpetuating. In this column, the authors argue that there is a causal relationship between income inequality and high school dropout rates among disadvantaged youth. In particular, moving from a low-inequality to a high-inequality state increases the likelihood that a male student from a low socioeconomic status drops out of high school by 4.1 percentage points. The lack of opportunity for disadvantaged students, therefore, may be self-perpetuating.
Jason Furman, Friday, February 20, 2015 - 00:00
Kirill Shakhnov, Saturday, January 17, 2015 - 00:00
Loukas Karabarbounis, Brent Neiman, Tuesday, November 25, 2014 - 00:00
Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, John Silvia, Saturday, October 25, 2014 - 00:00
Judith Niehues, Sunday, September 28, 2014 - 00:00
Reto Foellmi, Isabel Martínez, Sunday, August 31, 2014 - 00:00
Coen Teulings, Sunday, June 15, 2014 - 00:00
Income inequality has increased worldwide in recent years. This column discusses the role of technological progress, globalisation, and the liberalisation of labour-market institutions in this growing inequality. The liberalisation of labour market institutions has made labour markets more flexible and created many jobs. But beyond a certain point, the net effect of further liberalisation might be negative for society.
Christoph Lakner , Branko Milanovic, Tuesday, May 27, 2014 - 00:00
Since 1988, rapid growth in Asia has lifted billions out of poverty. Incomes at the very top of the world income distribution have also grown rapidly, whereas median incomes in rich countries have grown much more slowly. This column asks whether these developments, while reducing global income inequality overall, might undermine democracy in rich countries.
Benedict Clements, David Coady, Ruud de Mooij, Sanjeev Gupta, Tuesday, April 15, 2014 - 00:00
The causes and consequences of rising inequality have stirred a lively debate on appropriate policy responses. This column reviews how governments have successfully used fiscal policy to address distributive concerns. It also examines the policy alternatives that countries can pursue in order to reduce income and wealth inequality at a minimum cost to efficiency. Such policies include exploitation of property taxes, reductions in tax deductions that favour upper-income groups, investing in increasing the human capital of low-income groups, and reforming social benefits.