# Tag Info

19

I find your question very interesting. The metric of median household income is also used by others to argue the presence of income inequality: https://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Causes However, it seems that it is not only the median but also the mean that stagnates: (I used family instead of household income because I ...

17

I've not see a strict analysis of the top one percent but I have seen an analysis of the top 400 tax payers, the very highest income taxpayers: Who are the rich? It depends who you ask and when. Since 1992, the IRS has tracked the top 400 earners in terms of adjusted gross income—the so called fortunate 400. ... Most importantly, this IRS report ...

17

To answer the question: Yes, the 1% is relatively stable. From The Economist: Membership in America's 1% is relatively stable; three-quarters of the households in the percentile one year will still be there the next. Also your "belief" that the vast majority of the income that the 1% receive is variable, from borrowing, etc, isn't actually true. The ...

16

The short answer is No. Every single year, except 2009, for the past 55 years of continuously recorded economic history, the world has been getting richer. The -2.1% global recession in 2009 was made up in 2010 with 4.1% growth. I was just working with the World Bank's World Development Indicators, which track global GDP growth, and I double checked. We ...

9

The reason you bring forward belongs to technological directed change, which is regarded one of the main explanations for wage growth differentials. Keep in mind it's not exactly the way you're phrasing it: The growth in tech companies rewards people who are skilled well for their kind of jobs (as opposed to "wealthy people"). Card and DiNardo have a nice ...

7

I think this gives an answer reasonably close to what you're looking for (from the NYTimes article, "In climbing the income ladder, location matters," featuring research by Raj Chetty, Emmanuel Saez, and others). The team of researchers initially analyzed an enormous database of earnings records to study tax policy, hypothesizing that different local and ...

6

Here is a fairly instructive figure showing a cross-country measure of income inequality: It shows that inequality was increasing for most of the last 35 years, but has started to decrease again recently. (You can read more at the source for this figure: http://www.conferenceboard.ca/hcp/hot-topics/worldinequality.aspx) Once data is weighted by population, ...

6

I suppose that it depends on the time scale you are considering. Over the very long run the poor seem to have benefited far more than the rich from growth. See for example Robert J. Samuelson in the Washington Post: By 1915, the United States was the world’s richest nation — and yet, most Americans were dirt poor by today’s standards. Adjusted for ...

6

All of these answers are true but don't provide an easy solution which doesn't use excel/code. Gini can be fairly easily computed by hand too. The Gini coefficient fundamentally shows the shaded region above the lorenz curve in order to get a relative gauge of the distance the lorenz curve is from the line of equality. Fundamentally what this shows is the ...

5

The recent development of many "developing countries" and "emerging markets" does not mean that Western colonial powers did not exploit them in the past. Emerging economies owe their modern GDP growth to cheap labor, as (former) Western colonial powers switched their (expensive) manufacturing bases to countries like China, India, etc. In the past, they were ...

5

Three points - one which has already been raised much better by denesp: Are household sizes the same (we see the answer as no)? How about amount of earners per household? What about the amount of goods and services that these household incomes can buy? Should wages be increasing if a dollar can get more goods and services, thanks to technology? Many ...

4

Maybe check Clark's work. He allegedly uses long time series. http://jasoncollins.org/2014/09/30/the-genetic-basis-of-social-mobility/

4

Let me preface this answer with a word of caution: your question is a very good and important one but it is also one that depends tremendously on the definitions of the terms it uses. I'm going to attempt to answer it in the most unassuming and non-technical way. You could pose it in technical terms and get a more precise answer. The wealth of the rich can ...

4

I understand the core point of your question as, "Do people with extremely high incomes pay proportionately less in taxes than average Americans?" Yes, extremely-high-income individuals do pay a lower percentage of their income in taxes than do upper-middle-class and high-income households, and even more than many middle-income households, but they tend to ...

4

To complement @rocinante answer the argument described in the question silently assumes that growth can happen only if you steal from somebody. So if the past colonies cannot steal from anybody, they are bound not to ameliorate their material welfare. Assume two persons, $A$ and $B$, that currently have the same unexploited resources. It so happens that in ...

4

They measure different things. In particular the Gini index measures inequality and is strongly affected by the number of individuals with almost nothing, while the Herfindahl index measures the diversity of the shares (for example the choice in a market) and is almost unaffected by those with almost no share If $n$ people had equal shares then the Gini ...

4

There could be some complicated models where high inequality could have effect on efficiency - the research is inconclusive (or to be more precise almost non existent) on the matter. However, in Public Economics, depending on the selected welfare function (ralwsian, utilitarian, charitable conservative/libertarian etc.), inequality matters for optimal ...

3

I think you are looking for data on real median incomes. If this concept is unknown to you, you can read about it on wikipedia. According to the data the real income of most households decreased after the financial crisis but is still above the 1995 level. This means that most households do live better. I don't know if the number of people on welfare would ...

3

I have to say I do not believe in simple all encompassing answers. The reasons behind the differences are probably complex and multitude, varying from country to country. Below are some answers that one runs into and I think these probably account for a share of the inequality. The book Why Nations Fail deals with the first question extensively. It is a ...

3

Although I'm not sure that Piketty ever directly discusses the exact definition of $r$, he does make it clear indirectly. On page 52 of the hardcover English-language edition of his book, Piketty declares his "first fundamental law of capitalism": Piketty obtains the share of income $\alpha$ from capital in national income from the income side of the ...

3

Regarding your first question: Usually public economists assume that utility is a concave function of income. Therefore, the utility gain from one additional dollar of income is lower for a rich person than for a poor person. This is consistent with risk averse behavior of individuals which we often observe when individuals face risky choices. If utility ...

3

While the owners of a successful business will generally experience an exponential growth compared to their employees, there are some factors to consider: I find it unrealistic for any business to maintain a growth rate of 100% over many years. (As per the example) You can only sell twice as much if you can find twice as many buyers. As a business grows, it ...

3

First, let us make a distinction between the functional distribution of income, related to how payment goes to factors of production, i.e, labour and capital, via wages and rents, and the personal distribution of income, which refers to how such factor payments are distributed across individuals or households. After commenting about this, we can start to ...

3

I have heard the claim that the economic growth benefits only the rich: they become richer while most people become poorer. Decomposing this for semantic meaning, this only holds water if you are equating wealth with "Social Position" instead of actual improvement of conditions. Assuming real wealth, certainly the Poor do not get poorer. They benefit by a ...

3

It is possible, but it involves consiberable work as you need to collect underlying income distributions across the world or to be able to estimate them. This has been done, for example in a World Bank policy research working paper 6719, Global Income Distribution From the Fall of the Berlin Wall to the Great Recession by Christoph Lakner and Branko ...

3

Here is the latest report of the Congressional Budget Office on federal taxes by households. The main result you are looking for is this one (page 31): The "Federal Taxes" row shows that the upper quintile tax bill is higher than the tax bill of the other four quintiles combined. (the data are averages but each quintile has same number of households so ...

3

As said in the comments, there is an important difference between household income and wages. Household income includes income from capital. As a higher share of total income is going to capital than to labour (see below), you would expect a divergence between household and wages. Similarly, productivity increases are not being translated into higher wages,...

3

Scrooge McDuck likes swimming in money, which is why he accumulates a lot of it without any intention of ever spending it. If you think bringing in Scrooge McDuck is far-fetched and irrelevant, you are right. People do not generally accumulate wealth with no intention of ever spending it. But suppose there were such people and, to make things concrete, ...

3

This is a Lorenz curve. The Gini coefficient is the area between 'equal wealth' and your chosen line, divided by all the area under the equal wealth curve. There are other illustrations online, for sure, which would explain this. The Wikipedia article is telling you that the actual distribution of income is not fully captured by the Gini coefficient. The ...

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