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On Income Inequality: The 2008 Great Recession and Long-Term Growth
Abstract
Income inequality has been relatively neglected in mainstream macroeconomics until recently, when the work of Stiglitz and Piketty, inter alios, has given it a higher profile. The standard view is that markets generally work efficiently in allocating resources and there is little cause for concern. This chapter disputes these views and makes the argument that the increase in income inequality over the last 30 years has led to an unsustainable increase in household debt, which is a reason why the 2008 crisis was so severe. Furthermore, turning to the long run, there is accumulating evidence that higher inequality lowers economic growth. Finally, we conclude by looking at the evidence as to what are the major determinants of income inequality.
... Some works support the role of increasing inequality in explaining the recession via its role in boosting loans to finance consumption. In light of low incomes and high inequality, increasing borrowing from banks to finance consumption resulted in the inability of the majority of borrowers to repay, a dangerous situation resulting in weakening consumer debt sustainability (McCombie and Spreafico 2017). Then, the banking crisis was exploited in the USA and transmitted to the world. ...
Income inequality is an important issue in achieving sustainable growth in developing economies. However, there is a dearth of studies that examine the distributional effects of structural changes accompanying economic development policies in developing economies, especially Egypt. This study investigates the extent to which income inequality has been affected by economic growth and structural changes that occurred in Egypt during the previous four decades. Unlike many empirical studies, the study applies an asymmetric methodology to capture the potential nonlinear effects of growth and structural changes on different locations of income inequality using the Quantile Autoregressive Distributed Lags model (QARDL). Results confirm an asymmetric cointegration relationship among variables and the speed of adjustment to catch up with the long-run equilibrium path differs significantly across different quantiles which confirms the asymmetric behavior. While the disequilibrium is corrected in the short run at a speed of 65% to 64% for the lower quantiles, the speed slows down to reach 55% to 58% at the upper locations of the Gini coefficient. Economic growth has a heterogeneous effect across different quantiles of inequality, moreover, the inverted U-shaped relationship is confirmed only across the lower half of quantiles. This implies that the Kuznets hypothesis is valid only when inequality becomes lower than its current levels in Egypt. Results also confirm the high improving distributional effect of urbanization in Egypt across all quantiles. Thus, it is useful for economic policymakers to implement policies that accelerate the urbanization process to reduce income inequality in Egypt.
... Important determinants of income inequality in China are the official migration policy pattern in China (Hukou -intervention government policy in regulation migration from rural to urban areas) and the social safety net. The rapid economic development in China in the last decades has fostered a rapid growth in income inequality, which in turn could slow down future economic growth or cause a recession in China (McCombie & Spreafico, 2017). ...
Research background: China's economic growth, however remarkable, is due to the Harrod-Domar nature of economic growth and, therefore, limited. The main limitation lies in the extension of the neoclassical growth model and the government need to decrease regional disparities using new migration, urbanization and social policy. Purpose of the article: It is the rising regional disparity in the total factor productivity to cause the income inequality increase (measured by GINI index) in China from 1952?2017. Our paper brings new insight into the main inequality determinants and causes in China, using a fractional integration modeling framework. Methods: Using fractional integration, we find total factor productivity (TFP), real gross domestic product per capita and growth and expenditures for the social safety net and employment effort to have a statistically significant impact on GINI. Income inequality in China is of a persistent nature with the effects of the shocks affecting the GINI index enduring over time. Findings & value added: The results of this study highlight the importance for model/policy changes by the policy makers and practitioners in China to deal with the inequality issue. This involves improving the growth model through innovation and technological advancement, relaxing TFP dependence on the physical inputs (labor and capital) to reduce income inequality.
This paper discusses the philosophical view proposed by Gregory Mankiw in his recent article “Defending the One Percent” (JEP 27-3, 2013): the just deserts view in application to income distribution. Mankiw’s view suffers from three unsolved problems: the Criteria Problem, the Measurement Problem, and the Problem of the Missing Desert Function. The overall conclusion is that Mankiw’s normative “Defense of the One Percent” fails quite drastically.
The paper argues that the process of financialization has profoundly changed how capitalist economies operate. The financial sector has grown relative to the real economy and become more fragile. Non-financial businesses have adopted shareholder value orientation, which had negative effects on investment. Working class households became squeezed because of rising inequality and have become more indebted, in particular in countries with real estate bubbles. Financial globalization has given rise to growing international imbalances, which have allowed two growth models to emerge: a debt-led consumption growth model and an export-led growth model. Both should be understood as reactions to the lack of effective demand due to the polarization of income distribution. The resulting finance-dominated accumulation regime is characterized by slow and fragile growth. The crisis is best understood as the outcome of the interaction of financialization and changes in income distribution.
During the past two generations, democratic forms have coexisted with massive increases in economic inequality in the United States and many other advanced democracies. Moreover, these new inequalities have primarily benefited the top 1 percent and even the top .01 percent. These groups seem sufficiently small that economic inequality could be held in check by political equality in the form of “one person, one vote.” In this paper, we explore five possible reasons why the US political system has failed to counterbalance rising inequality. First, both Republicans and many Democrats have experienced an ideological shift toward acceptance of a form of free market capitalism that offers less support for government provision of transfers, lower marginal tax rates for those with high incomes, and deregulation of a number of industries. Second, immigration and low turnout of the poor have combined to make the distribution of voters more weighted to high incomes than is the distribution of households. Third, rising real income and wealth has made a larger fraction of the population less attracted to turning to government for social insurance. Fourth, the rich have been able to use their resources to influence electoral, legislative, and regulatory processes through campaign contributions, lobbying, and revolving door employment of politicians and bureaucrats. Fifth, the political process is distorted by institutions that reduce the accountability of elected officials to the majority and hampered by institutions that combine with political polarization to create policy gridlock.
Summary: This paper assesses how pro-poor and inclusive Asia’s recent growth has been, and what factors have been driving these outcomes. It finds that while poverty has fallen across the region over the last two decades, inequality has increased, dampening the impact of growth on poverty reduction. As a result, relative to other emerging and developing regions and to Asia’s own past, the recent period of growth has been both less inclusive and less pro-poor. Our analysis suggests a number of policies that could help redress these trends and broaden the benefits of growth in Asia. These include fiscal policies to increase spending on health, education, and social safetynets; labor market reforms to boost the labor share of total income; and reforms to make financial systems more inclusive.
This paper argues that although the crisis may have emerged in the financial sector, its roots are much deeper and lie in a structural change in income distribution that has been going on for the past three decades. The widespread increase of inequality depressed aggregate demand and prompted monetary policy to react by maintaining a low level of interest rate which itself allowed private debt to increase beyond sustainable levels. On the other hand the search for high-return investment by those who benefited from the increase in inequalities led to the emergence of bubbles. Net wealth became overvalued, and high asset prices gave the false impression that high levels of debt were sustainable. The crisis revealed itself when the bubbles exploded, and net wealth returned to normal level. We further argue that how the trend of increasing inequality interacted differently with policies and institutions, to yield radically different outcomes in the US and in the large European Union countries before the onset of the crisis.
The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group's bargaining power is more effective.
Is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth, and lifetime utility than do differences in shocks received over the working lifetime. (JEL D31, D91, J24, J31)
This book is about how much people earn and why the distribution of earnings has been changing over time. The gap between the top and bottom in the United States has widened significantly since 1980. Why has this happened? Is it due to new technologies? What is the role of globalization? Are there historical precedents? The book begins with the ‘race’ between technology and education, and shows that continuing technical progress does not necessarily imply a continuing rise in dispersion. It then examines the experience of twenty OECD countries over the 20th century, material presented in the form of twenty country case studies. The book breaks new ground in assembling data on the distribution of individual earnings covering much of the 20th century and drawing on a variety of under-exploited sources. The findings overturn a number of widely-held beliefs. It is not the earnings of the low paid that have been most affected by the recent changes; widening is largely due to what is happening at the top. The recent rise in earnings dispersion is not unprecedented, but should be seen as part of a longer-run history of successive compression and expansion of earnings differences.
The relationship between income inequality and economic growth is complex and the evidence mixed. This paper focuses on the connections between income inequality and the fragility of economic growth. We find that longer growth spells—periods of strong, healthy, per capita growth—are robustly associated with more equality in the income distribution, even when controlling for a range of other standard determinants. A key implication is that it would be a gamble to think that distribution will take care of itself provided policy makers steadfastly pursue growth. Over longer horizons, avoiding excessive inequality and sustaining economic growth may be two sides of the same coin.
In the three decades to the recent economic downturn, wage gaps widened and household income inequality as measured by GINI increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth. This report analyses the major underlying forces behind these developments. It examines to which extent economic globalisation, skill-biased technological progress and institutional and regulatory reforms have had an impact on the distribution of earnings. The report further provides evidence of how changes in family formation and household structures have altered household earnings and income inequality. And it documents how tax and benefit systems have changed in the ways they redistribute household incomes. The report discusses which policies are most promising to counter increases in inequalities and how the policy mix can be adjusted when public budgets are under strain. "Analyses rely on simple statistical techniques that are accessible to a large readership... the graphic and charts are of great help to gain a quick visual grasp of the various issues addressed."
Originally published in 1975, Equality and Efficiency: The Big Tradeoff is a very personal work from one of the most important macroeconomists of the last hundred years. And this new edition includes “Further Thoughts on Equality and Efficiency,” a paper published by the author two years later. In classrooms Arthur M. Okun may be best remembered for Okun’s Law, but his lasting legacy is the respect and admiration he earned from economists, practitioners, and policymakers. Equality and Efficiency is the perfect embodiment of that legacy, valued both by professional economists and those readers with a keen interest in social policy. To his fellow economists, Okun presents messages, in the form of additional comments and select citations, in his footnotes. To all readers, Okun presents an engaging dual theme: The market needs a place, and the market needs to be kept in its place. As Okun puts it: Institutions in a capitalist democracy prod us to get ahead of our neighbors economically after telling us to stay in line socially. This double standard professes and pursues an egalitarian political and social system while simultaneously generating gaping disparities in economic well-being. Today, Okun’s dual theme feels incredibly prescient as we grapple with the hot-button topic of income inequality. In his foreword, Lawrence H. Summers declares: On what one might think of as questions of “economic philosophy,” I doubt that Okun has been improved on in the subsequent interval. His discussion of how societies rely on rights as well as markets should be required reading for all young economists who are enamored with market solutions to all problems.
A Theoretical model consists of certain hypotheses concerning the causal inter-relationship between various magnitudes or forces and the sequence in which they react on each other. We all agree that the basic requirement of any model is that it should be capable of explaining the characteristic features of the economic process as we find them in reality. It is no good starting off a model with the kind of abstraction which initially excludes the influence of forces which are mainly responsible for the behaviour of the economic variables under investigation; and upon finding that the theory leads to results contrary to what we observe in reality, attributing this contrary movement to the compensating (or more than compensating) influence of residual factors that have been assumed away in the model. In dealing with capital accumulation and economic growth, we are only too apt to begin by assuming a ‘given state of knowledge’ (that is to say, absence of technical progress) and the absence of ‘uncertainty’, and content ourselves with saying that these two factors — technical progress and uncertainty — must have been responsible for the difference between theoretical expectation and the recorded facts of experience. The interpretative value of this kind of theory must of necessity be extremely small.
Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. Now, as the world struggles to recover, it's tempting to blame what happened on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed. Rajan shows how the individual choices that collectively brought about the economic meltdown--made by bankers, government officials, and ordinary homeowners--were rational responses to a flawed global financial order in which the incentives to take on risk are incredibly out of step with the dangers those risks pose. He traces the deepening fault lines in a world overly dependent on the indebted American consumer to power global economic growth and stave off global downturns. He exposes a system where America's growing inequality and thin social safety net create tremendous political pressure to encourage easy credit and keep job creation robust, no matter what the consequences to the economy's long-term health; and where the U.S. financial sector, with its skewed incentives, is the critical but unstable link between an overstimulated America and an underconsuming world. In Fault Lines, Rajan demonstrates how unequal access to education and health care in the United States puts us all in deeper financial peril, even as the economic choices of countries like Germany, Japan, and China place an undue burden on America to get its policies right. He outlines the hard choices we need to make to ensure a more stable world economy and restore lasting prosperity.
Although middle-income families don't earn much more than they did several decades ago, they are buying bigger cars, houses, and appliances. To pay for them, they spend more than they earn and carry record levels of debt. In a book that explores the very meaning of happiness and prosperity in America today, Robert Frank explains how increased concentrations of income and wealth at the top of the economic pyramid have set off "expenditure cascades" that raise the cost of achieving many basic goals for the middle class. Writing in lively prose for a general audience, Frank employs up-to-date economic data and examples drawn from everyday life to shed light on reigning models of consumer behavior. He also suggests reforms that could mitigate the costs of inequality. Falling Behind compels us to rethink how and why we live our economic lives the way we do.
During the last 40 years, political philosophers have made important advances in our understanding of why equality is valuable, and what kind of equality is important. This article summarizes the development of these ideas, in particular, the contributions of John Rawls, Amartya Sen, Ronald Dworkin, Robert Nozick, Richard Arneson, and G. A. Cohen. It shows how these ideas have filtered into economic thinking in the conceptualization of equality of opportunity. It concludes with a brief discussion of how these ideas might be extended to evaluate intergenerational and global distributions of income or welfare.
Using a vast swath of data spanning the past six decades, Unequal Democracy debunks many myths about politics in contemporary America, using the widening gap between the rich and the poor to shed disturbing light on the workings of American democracy. Larry Bartels shows the gap between the rich and poor has increased greatly under Republican administrations and decreased slightly under Democrats, leaving America grossly unequal. This is not simply the result of economic forces, but the product of broad-reaching policy choices in a political system dominated by partisan ideologies and the interests of the wealthy. Bartels demonstrates that elected officials respond to the views of affluent constituents but ignore the views of poor people. He shows that Republican presidents in particular have consistently produced much less income growth for middle-class and working-poor families than for affluent families, greatly increasing inequality. He provides revealing case studies of key policy shifts contributing to inequality, including the massive Bush tax cuts of 2001 and 2003 and the erosion of the minimum wage. Finally, he challenges conventional explanations for why many voters seem to vote against their own economic interests, contending that working-class voters have not been lured into the Republican camp by "values issues" like abortion and gay marriage, as commonly believed, but that Republican presidents have been remarkably successful in timing income growth to cater to short-sighted voters. Unequal Democracy is social science at its very best. It provides a deep and searching analysis of the political causes and consequences of America's growing income gap, and a sobering assessment of the capacity of the American political system to live up to its democratic ideals.
Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff members and are published to elicit comment and to encourage debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011
This note raises the IMF’s profile on a number of issues related to inequality, unemployment, governance, etc. It builds on earlier empirical work that examined correlations between growth downbreaks/duration of growth spells and a range of macro/policy/institutional factors. This paper is designed to be more accessible, more policy oriented, and focused squarely on the issue of inequality and the sustainability of growth. It will reference the literature that has gained prominence in the wake of the global crisis, and the possible links between the crisis and rising inequality in countries at the epicenter of the crisis. The analytical findings will also be connected to real world policy narratives in certain countries, to provide texture to the results and enhance policy relevance. The paper will argue that, based on the empirical findings, more equality in the income distribution is associated with longer-lived growth spells. Broad redistributive policies are not necessarily pro-growth, however, as these can have strong disincentive effects. The paper’s policy discussion is appropriately cautious, therefore, offering only tentative ideas, for example, active labor market policies and more attention to human capital investments designed to avoid conflicts between efficiency and equity perspectives.
"Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy--but as this book demonstrates, America's policymakers respond almost exclusively to the preferences of the economically advantaged. Affluence and Influence definitively explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. With sharp analysis and an impressive range of data, Martin Gilens looks at thousands of proposed policy changes, and the degree of support for each among poor, middle-class, and affluent Americans. His findings are staggering: when preferences of low- or middle-income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of less advantaged groups. In contrast, affluent Americans' preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower-income groups or not. Gilens shows that representational inequality is spread widely across different policy domains and time periods. Yet Gilens also shows that under specific circumstances the preferences of the middle class and, to a lesser extent, the poor, do seem to matter. In particular, impending elections--especially presidential elections--and an even partisan division in Congress mitigate representational inequality and boost responsiveness to the preferences of the broader public.
The paper studies how high household leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of high-income households, a large increase in debt leverage of the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where higher leverage and crises arise endogenously in response to a growing income share of high-income households. The model matches the profiles of the income distribution, the debt-to-income ratio and crisis risk for the three decades prior to the Great Recession.
Each of four theoretical traditions in the study of American politics—which can be characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism—offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.
A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.
Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.
This paper assesses how pro-poor and inclusive Asia’s recent growth has been, and what factors have been driving these outcomes. It finds that while poverty has fallen across the region over the last two decades, inequality has increased, dampening the impact of growth on poverty reduction. As a result, relative to other emerging and developing regions and to Asia’s own past, the recent period of growth has been both less inclusive and less pro-poor. Our analysis suggests a number of policies that could help redress these trends and broaden the benefits of growth in Asia. These include fiscal policies to increase spending on health, education, and social safetynets; labor market reforms to boost the labor share of total income; and reforms to make financial systems more inclusive.
How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970–2010 national
balance sheets recently compiled in the top eight developed economies. For the United States, United Kingdom, Germany, and
France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise` of wealth-income
ratios in recent decades, from about 200–300% in 1970 to 400–600% in 2010. In effect, today’s ratios appear to be returning
to the high values observed in Europe in the eighteenth and nineteenth centuries (600–700%). This can be explained by a long-run
asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity
and population growth, in line with the β = s g β=sg Harrod-Domar-Solow formula. That is, for a given net saving rate s = 10%, the long-run wealth-income ratio β is about 300% if g = 3% and 600% if g = 1.5%. Our results have implications for capital taxation and regulation and shed new light on the changing nature of wealth,
the shape of the production function, and the rise of capital shares. JEL Codes: E10, E20, D30, D31, D33.
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The top 1 percent of Americans control 40 percent of the nation's wealth. And, as Joseph E. Stiglitz explains, while those at the top enjoy the best health care, education, and benefits of wealth, they fail to realize that "their fate is bound up with how the other 99 percent live." Stiglitz draws on his deep understanding of economics to show that growing inequality is not inevitable: moneyed interests compound their wealth by stifling true, dynamic capitalism. They have made America the most unequal advanced industrial country while crippling growth, trampling on the rule of law, and undermining democracy. The result: a divided society that cannot tackle its most pressing problems. With characteristic insight, Stiglitz examines our current state, then teases out its implications for democracy, for monetary and budgetary policy, and for globalization. He closes with a plan for a more just and prosperous future.
This book, based on thirty years' research, goes an important stage beyond either of these ideas: it demonstrates that more unequal societies are bad for almost everyone within them---the well-off as well as the poor. The remarkable data the book lays out and the measures It uses are like a spirit level which we can hold up to compare the conditions of different societies. The differences revealed, even between rich market democracies, are striking. Almost every modern social and environmental problem---ill-health, lack of community life, violence, drugs, obesity, mental illness, long working hours, big prison populations---is more likely to occur in a less equal society. The Spirit Level goes to the heart of the apparent contradiction between the material success and social failings of many modern societies, but it does not simply provide a key to diagnosing our ills. It tells us how to shift the balance from self-interested 'consumerism' to a friendlier and more collaborative society. It shows a way out of the social and environmental problems which beset us and opens up a major new approach to improving the real quality of life, not just for the poor but for everyone. It is, in its conclusion, an optimistic book, which should revitalize politics and provide a new way of thinking about how we organize human communities. As the authors write, 'It falls to our generation to make one of the biggest transformations in human history. The role of this book is to point out that greater equality is the material foundation on which better social relations are built.' (PsycINFO Database Record (c) 2012 APA, all rights reserved)(jacket)
One might expect that rising U.S. 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, U.S. 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% and top 5% of the income distribution. We find that demand drag did not occur because the spending share of the bottom 95% rose, accompanied by a historic increase in borrowing. The unsustainable rise in household leverage concentrated in the bottom 95% ultimately spawned the Great Recession. In the Recession’s aftermath, the inability of the bottom 95% to generate adequate demand without faster income growth helps explain the stagnant recovery.
In his widely discussed book "Fault Lines" (2010), Raghuram Rajan argues that many U.S. consumers have reacted to the decline in their relative permanent incomes since the early 1980s by reducing saving and increasing debt. This has temporarily kept private consumption and thus aggregate demand and employment high, despite stagnating incomes for many households. But it also contributed to the creation of a credit bubble, which eventually burst, and a large current account deficit in the United States. We place the Rajan hypothesis in the context of competing theories of consumption, and survey the empirical literature on the effects of inequality on household behaviour beyond the largely anecdotal evidence provided in Rajan (2010). We argue that the Rajan hypothesis, supported by the empirical evidence, calls for a renaissance of the relative income hypothesis of consumption.
Дается обзор теорий, касающихся одной из ключевых проблем политической экономии, - проблемы распределения дохода. Имеющиеся теории классифицируются по четырем группам: классические (рикардианские), марксистские, неоклассические и кейнсианские.
We identify structural breaks in economic growth in 140 countries and use these to define growth spells: periods of high growth preceded by an upbreak and ending either with a down break or with the end of the sample. Growth spells tend to be shorter in African and Latin American countries than elsewhere. We find that growth duration is positively related to: the degree of equality of the income distribution; democratic institutions; export orientation (with higher propensities to export manufactures, greater openness to FDI, and avoidance of exchange rate overvaluation favorable for duration); and macroeconomic stability (with even moderate instability curtailing growth duration).
This book is about how much people earn and why the distribution of earnings has been changing over time. The gap between the top and bottom in the United States has widened significantly since 1980. Why has this happened? Is it due to new technologies? What is the role of globalisation? Are there historical precedents? The book begins with the "race" between technology and education, and shows that continuing technical progress does not necessarily imply a continuing rise in dispersion. It then examines the experience of 20 OECD countries over the twentieth century, material presented in the form of 20 country case studies. The book breaks new ground in assembling data on the distribution of individual earnings covering much of the twentieth century and drawing on a variety of under-exploited sources. The findings overturn a number of widely-held beliefs. It is not the earnings of the low paid that have been most affected by the recent changes; widening is largely due to what is happening at the top. The recent rise in earnings dispersion is not unprecedented, but should be seen as part of a longer-run history of successive compression and expansion of earnings differences. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/9780199532438/toc.html
This paper uses Social Security Administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality
and mobility in the United States. Annual earnings inequality is U-shaped, decreasing sharply up to 1953 and increasing steadily
afterward. Short-term earnings mobility measures are stable over the full period except for a temporary surge during World
War II. Virtually all of the increase in the variance in annual (log) earnings since 1970 is due to increase in the variance
of permanent earnings (as opposed to transitory earnings). Mobility at the top of the earnings distribution is stable and
has not mitigated the dramatic increase in annual earnings concentration since the 1970s. Long-term mobility among all workers
has increased since the 1950s but has slightly declined among men. The decrease in the gender earnings gap and the resulting
substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long-term mobility
among all workers.