Research Topics

Publications on Inequality

There are 13 publications for Inequality.
  • Trump’s Bait and Switch


    Working Paper No. 887 | March 2017
    Job Creation in the Midst of Welfare State Sabotage

    President Trump’s faux populism may deliver some immediate short-term benefits to the economy, masking the devastating long-term effects from his overall policy strategy. The latter can be termed “welfare state sabotage” and is a wholesale assault on essential public sector institutions and macroeconomic stabilization features that were built during the New Deal era and ushered in the “golden age” of the American economy. Starting in the late ’70s, many of these institutions were significantly eroded by Republicans and Democrats alike, paving the way for the rise of Trump but paling in comparison with what is to come.

  • Gender Dimensions of Inequality in the Countries of Central Asia, South Caucasus, and Western CIS


    Working Paper No. 858 | January 2016

    The collapse of the Soviet Union initiated an unprecedented social and economic transformation of the successor countries and altered the gender balance in a region that counted gender equality as one of the key legacies of its socialist past. The transition experience of the region has amply demonstrated that the changes in the gender balance triggered by economic shifts are far from obvious, and that economic expansion and women’s economic empowerment do not always go hand in hand. Therefore, active measures to enhance women’s economic empowerment should be of central concern to the policy dialogue aimed at poverty and inequality reduction and inclusive growth. In this paper, we establish the current state of various dimensions of gender inequalities and their past dynamics in the countries of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan), South Caucasus (Armenia, Azerbaijan, and Georgia), and Western CIS (Belarus, Moldova, and Ukraine), and propose steps aimed at reducing those inequalities in the context of inclusive growth, decent job creation, and economic empowerment.

  • Redistribution in the Age of Austerity


    Working Paper No. 856 | December 2015
    Evidence from Europe, 2006–13

    We examine the relationship between changes in a country’s public sector fiscal position and inequality at the top and bottom of the income distribution during the age of austerity (2006–13). We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on the EU’s Statistics on Income and Living Conditions SLIC and International Monetary Fund data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggest a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies, and likely produces increased incentives for rent seeking while reducing incentives for workers to increase productivity.

    Download:
    Associated Programs:
    Author(s):
    Markus P.A. Schneider Stephen Kinsella Antoine Godin

  • A Nonbehavioral Theory of Saving


    Working Paper No. 844 | July 2015

    We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the household debt-to-income ratio, and maintaining it depends on some sort of asset bubble. This framework allows us to better understand the factors that led to the Great Recession and the dilemma of a repeat of this kind of unsustainable process or secular stagnation. Sustainable growth requires a decrease in income inequality, an improvement in the external position, and a relaxation of the fiscal stance of the government.

  • The Rise of Money and Class Society


    Working Paper No. 832 | February 2015
    The Contributions of John F. Henry
    This paper explores the rise of money and class society in ancient Greece, drawing historical and theoretical parallels to the case of ancient Egypt. In doing so, the paper examines the historical applicability of the chartalist and metallist theories of money. It will be shown that the origins and the evolution of money were closely intertwined with the rise and consolidation of class society and inequality. Money, class society, and inequality came into being simultaneously, so it seems, mutually reinforcing the development of one another. Rather than a medium of exchange in commerce, money emerged as an “egalitarian token” at the time when the substance of social relations was undergoing a fundamental transformation from egalitarian to class societies. In this context, money served to preserve the façade of social and economic harmony and equality, while inequality was growing and solidifying. Rather than “invented” by private traders, money was first issued by ancient Greek states and proto-states as they aimed to establish and consolidate their political and economic power. Rather than a medium of exchange in commerce, money first served as a “means of recompense” administered by the Greek city-states as they strived to implement the civic conception of social justice. While the origins of money are to be found in the origins of inequality, a well-functioning democratic society has the power to subvert the inequality-inducing characteristic of money via the use of money for public purpose, following the principles of Modern Money Theory (MMT). When used according to the principles of MMT, the inequality-inducing characteristic of money could be undermined, while the current trends in rising income and wealth disparities could be contained and reversed. 
    Download:
    Associated Program:
    Author(s):
    Alla Semenova L. Randall Wray

  • Tale of Two Ginis in the United States, 1921–2012


    Working Paper No. 826 | January 2015

    Following a methodology proposed by Jantzen and Volpert (2012), we use IRS Adjusted Gross Income (AGI) data for the United States (1921–2012) to estimate two Gini-like indices representing inequality at the bottom and the top of the income distribution. We also calculate the overall Gini index as a function of the parameters underlying the two indices. Our findings can be summarized as follows. First, we find that the increase in the Gini index from the mid 1940s to the late 1970s seems to be mostly explained by an increase in inequality at the bottom of the income distribution, which more than offsets the decrease in inequality at the top. The implication is that middle incomes gained relative to high incomes, but especially relative to low incomes. Conversely, it is rising inequality at the top that appears to drive the rise in the Gini index since 1981. Second, inequality at the top of the income distribution follows a U-shaped trajectory over time, similar to the pattern of the share of top incomes documented by Piketty and Saez (2003, 2006) and Atkinson, Piketty, and Saez (2011). Third, the welfare effects of the different forces behind an increasing Gini index can be evaluated in light of the Lorenz-dominance criterion proposed by Atkinson (1970): both top-driven and bottom-driven increases in the index appear not to imply strict Lorenz dominance by previous income distributions, and therefore are not associated with lower welfare in an absolute sense. In a relative sense, however, once average growth rates over the two periods are taken into account, the top-driven increase in inequality since 1981 appears to have been welfare reducing.

    Download:
    Associated Program:
    Author(s):
    Markus P.A. Schneider Daniele Tavani

  • Public Preferences for Redistributive Policies in Israel


    Working Paper No. 815 | September 2014

    This paper contributes to the literature on inequality and welfare policy by studying public support for redistributive policies in Israel, a society with an extreme level of socioeconomic inequality. Drawing on the relevant literature and taking into consideration the distinct demographic makeup of contemporary Israeli society, the study aims to describe public support for opportunity-enhancing and outcome-based redistributive policies and to explore the extent to which individual economic and demographic characteristics are associated with policy preferences. Analysis of data from a unique topical module of the 2008 Israel Social Survey reveals that support for opportunity-based programs is strong overall, but that the Israeli public is deeply divided along ethnic lines, religious affiliation, and immigration status. While results from multinomial regression analyses provide support for the self-interest theory, the findings also underscore the significance of various demographic and social indicators as determinants of policy preferences. These findings are discussed in light of the current debates on the sources of, and possible remedies for, the growing social and economic polarization within Israeli society.

  • Inequality and Household Finance during the Consumer Age


    Working Paper No. 752 | February 2013

    One might expect that rising US income inequality would reduce demand growth and create a drag on the economy because higher-income groups spend a smaller share of income. But during a quarter century of rising inequality, US growth and employment were reasonably strong, by historical standards, until the Great Recession. This paper analyzes this paradox by disaggregating household spending, income, saving, and debt between the bottom 95 percent and top 5 percent of the income distribution. We find that the top 5 percent did indeed spend a smaller share of income, but demand drag did not occur because the spending share of the bottom 95 percent rose, accompanied by a historic increase in borrowing. The unsustainable rise in household leverage concentrated in the bottom 95 percent ultimately spawned the Great Recession. The demand drag of rising inequality could be one explanation for the stagnant recovery in the recession’s aftermath.

    Download:
    Associated Program:
    Author(s):
    Barry Z. Cynamon Steven M. Fazzari

  • A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being


    Working Paper No. 703 | January 2012

    We use the Levy Institute Measure of Economic Well-being (LIMEW), the most comprehensive income measure available to date, to compare economic well-being in Canada and the United States in the first decade of the 21st century. This study represents the first international comparison based on LIMEW, which differs from the standard measure of gross money income (MI) in that it includes noncash government transfers, public consumption, income from wealth, and household production, and nets out all personal taxes.

    We find that, relative to the United States, median equivalent LIMEW was 11 percent lower in Canada in 2000. By 2005, this gap had narrowed to 7 percent, while the difference in median equivalent MI was only 3 percent. Inequality was notably lower in Canada, with a Gini coefficient of 0.285 for equivalent LIMEW in 2005, compared to a US coefficient of 0.376—a  gap that primarily reflects the greater importance of income from wealth in the States. However, the difference in Gini coefficients declined between 2000 and 2005. We also find that the elderly were better off relative to the nonelderly in the United States, but that high school graduates did better relative to college graduates in Canada.

  • Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze—an Update to 2007


    Working Paper No. 589 | March 2010
    I find here that the early and mid-aughts (2001 to 2007) witnessed both exploding debt and a consequent “middle-class squeeze.” Median wealth grew briskly in the late 1990s. It grew even faster in the aughts, while the inequality of net worth was up slightly. Indebtedness, which fell substantially during the late 1990s, skyrocketed in the early and mid-aughts; among the middle class, the debt-to-income ratio reached its highest level in 24 years. The concentration of investment-type assets generally remained as high in 2007 as during the previous two decades. The racial and ethnic disparity in wealth holdings, after stabilizing throughout most of the 1990s, widened in the years between 1998 and 2001, but then narrowed during the early and mid-aughts. Wealth also shifted in relative terms, away from young households (particularly those under age 45) and toward those in the 55–74 age group. Projections to July 2009, made on the basis of changes in stock and housing prices, indicate that median wealth plunged by 36 percent and there was a fairly steep rise in wealth inequality, with the Gini coefficient advancing from 0.834 to 0.865.

  • Distributional Impact of the American Recovery and Reinvestment Act


    Working Paper No. 568 | June 2009
    A Microsimulation Approach

    Over the last two decades, those at the bottom of the income scale have seen their incomes stagnate, while those at the top have seen theirs skyrocket; without intervention, the recession that began in December 2007 was likely to exacerbate this trend. Will the American Recovery and Reinvestment Act of 2009 (ARRA) be able to keep the situation from getting worse for those at the bottom of the income scale? Will ARRA reverse the upward trend in inequality that we’ve seen in the recent past? The authors of this new working paper employ a microsimulation of ARRA to address these questions. They find that, despite a large amount of job creation, ARRA is likely to have little impact on overall income inequality, or on the income gaps between relatively advantaged and disadvantaged groups.

     

  • Caste and Wealth Inequality in India


    Working Paper No. 566 | May 2009

    In this paper, we conduct the novel exercise of analyzing the relationship between overall wealth inequality and caste divisions in India using nationally representative surveys on household wealth conducted during 1991–92 and 2002–03. According to our findings, the groups in India that are generally considered disadvantaged (known as Scheduled Castes or Scheduled Tribes) have, as one would expect, substantially lower wealth than the “forward” caste groups, while the Other Backward Classes and non-Hindus occupy positions in the middle. Using the ANOGI decomposition technique, we estimate that between-caste inequality accounted for about 13 percent of overall wealth inequality in 2002–03, in part due to the considerable heterogeneity within the broadly defined caste groups. The stratification parameters indicate that the forward caste Hindus overlap little with the other caste groups, while the latter have significantly higher degrees of overlap with one another and with the overall population. Using this method, we are also able to comment on the emergence and strengthening of a “creamy layer,” or relatively well-off group, among the disadvantaged castes, especially the Scheduled Tribes.

    Download:
    Associated Program:
    Author(s):
    Ajit Zacharias Vamsi Vakulabharanam

  • Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959–2004


    Working Paper No. 556 | January 2009

    The motivation to construct the LIMEW in lieu of relying on the official measures of well-being is to provide a more comprehensive measure of economic inequality that will also show the disparities among key demographic groups. The authors of this new working paper show that the LIMEW provides a perspective on disparities among population subgroups that differs from the official measures, as well as differing time trends. For example, according to the LIMEW, there has been an almost continuous improvement in the relative well-being of the elderly, which were 9 percent better off than the nonelderly in 2000 because of greater income from wealth. Moreover, the principle factor behind the increase in inequality over the 1959–2004 period was the rising contribution of income derived from nonhome wealth.

Quick Search

Search in: