Search

The economic literature has so far devoted a very limited attention to the rich, apart from the recent studies focusing on top income shares starting from the works of Piketty (J Polit Econ 111:1004–1042, 2003; J Eur Econ Assoc 3:382–392, 2005). Indeed, currently we have no way of defining the rich, how many there are, how much their labour earnings impact on their overall income and what share of national incomes is concentrated in their hands. We don’t even know if the rich, in the various countries, have increased in numbers or have become richer in recent years. In this chapter, we intend to investigate “the planet of the rich”, in an attempt to fill some of these gaps in the economic literature. More specifically, we will try to come up with a definition of the rich, suggesting a criterion by which they may be identified; so we can establish how many there are in Italy and in the main European countries, identify the origin of their income, particularly for the “working rich”, and determine whether their number is increasing and they are becoming richer.

The paper analyzes the relationship between income shares, wealth and growth in an environment where positional goods are taken into account and rent is generated. This hypothesis, which is a macro engine for inequality, creates a gap between profit share and property share and implies a clear-cut distinction between capital and wealth. The interactions between these aspects are studied in a medium-run growth model led by aggregate demand, where monetary aspects also matter. The results of the dynamic analysis, obtained by means of simulations, are in keeping with some recent stylized facts. Furthermore, the model generates bounded dynamics, where the co-movements between variables are more complex than those obtained in the recent literature. At the same time the disequilibrium processes can create a link between medium-run considerations and a more long-run perspective. Esse artigo analisa a relação entre participação na renda, riqueza e crescimento em um ambiente em que bens de ‘status’ são levados em consideração e renda é gerada. Essa hipótese, que é uma macro motor de desigualdade, cria um hiato entre participação dos lucro e participação de propriedades e implica em uma distinção clara entre capital e riqueza. As interações entre esses aspectos são estudados em um modelo de crescimento de médio prazo impulsionado pela demanda agregada, onde aspectos monetários são importantes também. Os resultados dessa análise dinâmica, obtidos por meio de simulações, estão de acordo com alguns fatos estilizados. Além disso, o modelo gera uma dinâmica restrita, onde o co-movimento entre as variáveis são mais complexos do que aqueles encontrados na literatura recente. Ao mesmo tempo, o processo de desequilíbrio pode criar uma ligação entre considerações de médio-prazo e uma perspectiva de mais longo prazo.

The aggregate income of oil-exporting countries relative to that of oil-poor countries has been remarkably constant in recent decades, despite the existence of structural gaps in productivity growth rates. This stylized fact is rationalized in an endogenous growth model of asymmetric trade where resource-poor and resource-rich economies display productivity differences but stable income shares due to terms-of-trade dynamics. The model yields two testable predictions that deserve empirical scrutiny: (i) the asymmetric impact, between exporters and importers, of national taxes on resource use on income shares and (ii) the inverse relation between terms-of-trade dynamics and total factor productivity growth.

The income share of the super-rich in the United States has grown rapidly since the early 1980s after a period of postwar stability. What factors drove this change? In this study, we investigate the institutional, policy, and economic shifts that may explain rising income concentration. We use single-equation error correction models to estimate the long- and short-run effects of politics, policy, and economic factors on pretax top income shares between 1949 and 2008. We find that the rise of the super-rich is the result of rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets.

Evidence abounds in the rural livelihoods literature that rural households do not only receive a significant proportion of their incomes from non-farm sources, but also it is a significant source of employment for rural folks. This paper examines the pattern and determinants of non-farm income diversification in rural Ghana. Results show that off-farm income constituted 43 percent of rural household income in 2005/6. Female-headed households tend to have larger off-farm income shares compared to male-headed households. Non-farm income shares followed the same gender pattern albeit less pronounced. Unlike in Latin America and Asia, in rural Ghana, non-farm self-employment income is more important than non-farm wage-employment income. Regression results show that the gender composition of households, age, education, and access to credit, electricity and markets are important determinants of multiple non-farm activities and non-farm income. The findings call for strategies that can help rural households maximize the benefits from income diversification.

A child support guideline is a formula used to calculate support payments based on a few family characteristics. Guidelines began replacing court awarded support payments in the late 1970s and early 1980s, and were eventually mandated by the federal government in 1988. Two fundamentally different types of guidelines are used: percentage of obligor income, and income shares models. This paper explores the incentives to divorce under the two schemes, and uses the NLSY data set to test the key predictions. We find that percentage of obligor income models are destabilizing for some families with high incomes. This may explain why several states have converted from obligor to income share models, and it provides a subtle lesson for the no-fault divorce debate.

This article investigates the dependence structure of income distribution in the US by providing two approaches – one regression-based and the other copula-based – to reveal new information about income dependence. The system of Seemingly Unrelated Regressions (SUR) is estimated for both quintile income shares and mean income growth by controlling for macroeconomic variables, and Kendall's tau statistics are derived for income dependence. Results from less restrictive copula models corroborate the regression-based results. However, income growth models do not support the common claim that the rich are getting richer while the poor are getting poorer. Income dependence patterns do not appear to be affected by business cycles, but Democratic and Republican presidential administrations have drastically different income dependence results.

We explain the substantial decline in work hours over the 20th century by the joint influence of the employees’ “pecuniary emulation” of the “conspicuous consumption” of top income earners and the balance of political power of employers and employees in the presence of conflicts of interest over the issue of working time. We present a new labor discipline model incorporating Veblen effects in which hours are determined by employers and subject to complete contracts but employee work effort is not. We show that while Veblen effects increase the hours sought by employees, the hours selected by profit-maximizing employers may exceed that preferred by employees, who may then seek to reduce work hours by means of collective bargaining or governmental intervention. We also identify conditions under which employees will prefer longer hours than offered by employers. Using newly available data on top income shares, and on work hours from 10 major industrial economies and covering the entire past century we test two hypotheses: that increases in the relative incomes of the very rich are associated with increased hours, while increases in the political representation of workers have the opposite effect. The estimated effects are large in economic magnitude, highly significant and robust to alternative econometric specifications, including country and time fixed effects. Using an alternative data set covering the last third of the past century we show that these results are robust to the inclusion of a measure of taxation and find that decentralized trade union bargaining (but not centralized bargaining) may raise working hours.

Despite similar levels of per capita income, education and technology, the development of labour income shares in OECD countries has displayed different patterns since 1960. The paper examines the role of demography in this regard. We first use a standard overlapping generations model to derive the mechanisms by which demographic change can affect the labour share. It turns out that demographic change can affect the labour share either by altering the domestic capital intensity, by causing factor-biased technological change or in a small open economy framework by creating a gap between domestic savings and investments. The latter affects the country's investments abroad and in return its net foreign asset income which directly leads to changes in the labour share. Empirical estimations based on these insights, provide evidence that an increases in the expected retirement durations and old-age dependency ratios as well as declines in labour force growth rates have indeed been major forces behind the decline in labour shares that took place in many countries. These effects tend to be larger in open economies and pension reforms towards a funded pension system seem to have accelerated the effects.

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967-2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993-2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

A year after the adoption of the 4 trillion yuan (US $586 billion) economic stimulus package, Chinas GDP grew 10.7% year on year in the last quarter of 2009, accelerating from 6.2%, 7.9% and 9.1% in the first, second and third quarters, respectively. Riding the strong economic growth, the rolling bull market prospects continue in China\'s housing sectors. China\'s land auctions continue to set new price records, with new price peaks reached multiple times in recent months. Housing prices in China\'s major cities grew at the fastest pace in recent months, with prices rising at a double digit rate in the latest data available for February of 2010. Prompted by fears of a bubble in the housing market, at the end of last year, the government announced a series of measures to dampen the overheated housing market. Among the new rules was a harsher property sales tax to curb speculation in the housing market. Thus, the Chinese government and many international investors appear worried that house prices might have reached unsustainable levels. Whether the fallout from any such mispricing would be similar to what happened in the U.S. is another important question for policy makers in particular. This study examines a wide array of data to document what has happened to prices across the many markets in China and to gauge whether they are sustainable. Data limitations are the key problem for any such study of the Chinese housing market. Times series lengths are no more than a decade for virtually any market because of recent changes that allowed for competitive bidding and pricing of property in China. To help deal with this limitation, we study the issue from a variety of perspectives. Two are traditional affordability metrics used in housing studies around the world: share of income devoted to housing and price-to-rent ratios. Income shares spent on housing are very high in China, but that alone does not necessarily indicate the presence of a bubble or general overpaying for property. As we discuss in the paper, there are various cultural and social reasons why it is not considered abnormal for Chinese households to dedicate much more than 30% of their income to housing. More interesting are the recent sharp rises in price-to-rent ratios in Chinas major markets. In the top seven markets nationally, the price-to-rent ratio increased from about 30 to 50 just within the past two years. As we argue in the paper, the key features in the sharp rise in the ratio, not the level of the ratio itself. Beyond these traditional affordability metrics, we also examine how Chinese house prices compare to fundamental production costs (which includes physical construction costs, land costs, and a normal profit for the developer). In the U.S. context, Glaeser, Gyourko and Saiz (2008) have shown that this supply side approach is a good predictor of mispricing in the bubble markets of the U.S. sunbelt region. Many Chinese markets are not in elastic supply, so this approach is not so readily transferable to them, but the analysis does suggest that prices are well above fundamental production costs in a number of markets. If the Chinese government does not restrict the supply of land in these markets, the implication is that prices should fall. We also conduct a detailed micro-level analysis of over 300 recent land auctions in Beijing. We are able to identify the location of each land sale, and then compare it to prices of fully finished housing units. While that analysis remains to be done, some market observers claim that recent land prices in particular have been above the trading value of completed units. If so, that would be a signal of mispricing. While that part of our analysis remains to be done, we will be able to document whether these claims are true, using hard data and spatial mapping technology.

Using annual data from 1919 to 2002, the structural transformation hypothesis proposed by Simon Kuznets helps explain the U-shape of U.S. top 1% or 0.01% income share distributions. Flexible autoregressive lag representations are employed and generalized methods of moments reinforce our results. First, as the employment share in goods producing activities falls, income inequality increases in the long run. Second, federal top taxation has only shortterm negative impacts. Third, these major results hold to business cycle controls (linear time trend and real output fluctuations) and to robustness checks of structural changes documented for the U.S. economy around the late 1970s.

We investigate how food-aid affects price and production of staple food, with a partial equilibrium model with non-separable production and consumption. The model captures the key characteristics of sub-Saharan Africa subsistence economies. Simulations generate negative but also positive food-aid elasticities of production. Conditions are identified which mitigate the negative impact and support a positive impact. The share of domestic food production in total staple food demand (+) and the share of income from staple food production in total household income (-) are key determinants. Price and production equations, estimated with a panel of district data of the Malawi maize market for the period 1999-2010, show a small positive impact of food-aid. Large negative impacts of food-aid are not likely given production and income shares and behavioural responses. © 2011 Elsevier Ltd.

What part of the inequality observed in a particular country is due to unequal opportunities, rather than to differences in individual efforts or luck? This paper estimates a lower bound for the opportunity share of inequality in labor earnings, household income per capita and household consumption per capita in six Latin American countries. Following John Roemer, the authors associate inequality of opportunity with outcome differences that can be accounted for by morally irrelevant pre-determined circumstances, such as race, gender, place of birth, and family background. Thus defined, unequal opportunities account for between 24 and 50 percent of inequality in consumption expenditure in the sample. Brazil and Central America are more opportunity-unequal than Colombia, Ecuador, or Peru."Opportunity profiles,"which identify the social groups with the most limited opportunity sets, are shown to be distinct from poverty profiles: ethnic origin and the geography of birth are markedly more important as determinants of opportunity deprivation than of outcome poverty, particularly in Brazil, Guatemala, and Peru.

Informal income smoothing by households before the post-Second World War expansion in public welfare has gained attention in the history of poverty and social insurance. Little direct empirical evidence has been available. Finnish household budgets from 1928 with intra-year panel data on informal transactions enable analysis of the use of savings, loans and informal assistance to counter income variation by worker families in Helsinki. Income shares of transfers were small compared with labour-based methods of supplementing the earnings of the surveyed male breadwinner families. Within the year, however, the combined use of assistance, credit, and savings accounts compensated on average 36% of income fluctuations, while means such as added workers or taking in lodgers appeared ineffective on the short run. Informal assistance mattered for the poorest households, but provided inferior coverage compared with that attained through credit and savings by more affluent workers. Income inequality was th...

When a very top group of the income distribution, infinitesimal in numbers, owns a finite share S of total income, the Gini coefficient G can be approximated by G ⁎ (1 − S ) + S , where G ⁎ is the Gini coefficient for the rest of the population. We provide a simple formal proof for this expression, give a general formula of the relationship when the top group is not infinitesimal, and offer two applications as illustrations.

This paper uses 1998 household level data from urban Malawi to look at the impact on consumption patterns of the share of total household income accruing to different individuals within the household. Specifically, male and female income shares and other factors which may influence intra-household bargaining such as education are analysed. The study finds that for some categories of good such as personal and household hygiene and clothing, unitary household models are unsuitable as intra-household relationships and differing preferences of individuals play a key role in consumption choices. Overall the results indicate that females favour household hygiene, vehicle repair and girls’ clothing while males favour male clothing. Consumption choices are influenced by both the income and education of the main male and female members, and crucially, the impact of income shares on household consumption is non-linear.

Summary Policy makers have high expectations for the rural non-farm economy (RNFE). Given high income shares, growing employment, and frequently low capital requirements, they see the RNFE as a potential pathway out of poverty for their rural poor. Yet available evidence suggests that pro-poor rural non-farm growth does not occur automatically. For the poor to benefit from rural non-farm growth, policy makers must stimulate buoyant rural economies, with robust non-farm income growth, not simply low-productivity employment. Moreover, the poor must gain access to growing market niches. Fluid labor markets provide one important bridge linking the rural poor to growing non-farm opportunities.

This paper examines the impact of increased competition and trade liberalization on skilled–unskilled wage inequality in the short run as well as the long run. It is shown that an increase in the number of firms in the producer services sector increases wage inequality in the short run even if the income shares of capital in the industrial and agricultural sectors were identical. A decrease in the services sector's fixed cost decreases wage inequality in the short run if the income share of capital in the agricultural sector is relatively large. Owing to the presence of external economies, a decrease in the services sector's fixed cost increases wage inequality in the long run. A decrease in import duty on the agricultural good increases wage inequality in the short as well as the long run but its effect in the long run is stronger due to the presence of external economies in the industrial sector.

The paper investigates the emergence of alternative growth, distribution and real exchange rate patterns as outcomes of institutional and socio-economic interactions between broadly defined actors in an export-oriented economy. The focus is on both the long-run configuration and short-run dynamics of the real exchange rate, the profit and wage shares, output growth, capacity utilization, and net foreign asset accumulation in a stock-flow consistent framework with fiscal polices affecting the internal and external equilibrium. Fluctuations in output and distribution between income shares and the real exchange rate are obtained via Structuralist-Goodwin dynamics.

The exercise by an Australian state agency of coercive powers against construction industry workers has been justified by reference to claimed gains in productivity and hence national welfare. Yet the literature suggests that a more cooperative approach to union—management relations would offer better opportunities for productivity improvement. This article examines the data behind the productivity claims and finds that they were erroneous, probably due to incorrect transcription, and that the source data indicated no relative productivity gains against the identified benchmark. Despite being made aware of this, the state agency and its consultant maintained the original claims about the size of productivity and welfare gains from the use of coercive powers. Official cross-industry and time series data also showed no productivity gains arising from the use of coercive powers. However, there is some evidence that there has been a shift of income shares in the industry from labour to capital. The findings have implications for understanding the role of commissioned studies in public debate, and for regulation of the construction industry.

This paper analyzes income and earnings concentration in Portugal from a long-run perspective using personal income and wage tax statistics. The results suggest that income concentration was much higher during the 1930s and early 1940s than it is today. Top income shares estimated from reported incomes deteriorated during the Second World War, even if Portugal did not take active participation in the conflict. However, the magnitude of the drop was less important than in other European countries. The level of concentration between 1950 and 1970 remained relatively high compared to countries such as Spain, France, UK or the United States. The decrease in income concentration, started very moderately at the end of the 1960s and which accelerated after the revolution of 1974, began to be reversed during the first half of the 1980s. During the last 15 years top income shares have increased steadily. The rise in wage concentration contributed to this process in a significant way. The evidence since 1989 suggests that the level of marginal tax rate at the top has not been a primary determinant of the level of top reported incomes. Marginal rates have stayed constant in a context of growing top shares.

This paper analyzes the relationship between macroeconomic factors and the income distribution using data on equivalized disposable household income from the United Kingdom for 1961–99. We argue in favour of fitting a parametric functional form to the income distribution for each year, and then modeling the time series of model parameters in terms of the macroeconomic factors, as this better allows us to take into account non-stationarity in the time series. Estimates from models that relate income distribution parameters to cyclical variables in first differences (to account for non-stationarity) suggest that neither inflation nor unemployment have significant effects on income inequality. Compared to the commonly-used method of modelling the income shares directly, our approach indicates that there was no clear cut relationship between macroeconomic factors and the UK income distribution during the last third of the twentieth century.

This article presents estimates of the shares of inputs in income for countries of the Organization for Economic Cooperation and Development, utilizing advanced panel data techniques. Its findings are as follows: A share of physical capital of over 0.50, as opposed to the conventional one third, is robust to several specifications of the production function; the organization's growth was driven mainly by accumulation of resources and not technological gains; and following the first oil shock, the share of physical capital dropped, whereas the share of human capital rose. Consequently, using the conventional shares may have led to overstating the severity of the post-1973 productivity slowdown.

It has been widely suggested by political scientists and economists, based on empirical evidence for the period since 1970, that the institution of centralized wage bargaining and the presence of a government of the left are associated with lower levels of income inequality. The authors make use of new data on top income shares as well as long-run series on wage inequality to examine the effects of partisanship and wage bargaining over a much longer time period, nearly the entire twentieth century. Their empirical results provide little support for the idea that either of these two factors is correlated with income inequality over this period. They then show that a closer look at the introduction of centralized wage bargaining in individual countries during the middle part of the twentieth century reveals that in countries that moved to centralize wage bargaining, income inequality had already been trending downward well before the institutional change, that the move to centralized bargaining did not alter this trend, and that these changes in income inequality were also observed in countries that did not adopt centralized wage bargaining at this time. The results suggest that there were alternative institutional paths to reduced income inequality during most of the twentieth century. This raises the possibility that either structural economic changes or commonly shared economic and political events, such as world wars and economic crises, may ultimately be more important for understanding the evolution of income inequality than are the institutional or partisan characteristics commonly considered to be decisive by political scientists.

The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. The authors of this paper revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, they are able to investigate the relationship for eleven developed countries over the period 1921-2002. The authors find no consistent relationship between lagged top income shares and current savings rates, and their standard errors are small enough that they are able to reject more than modest effects in either direction. They view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.

Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920–2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. We observe a sharp rise in top income shares during the late-1990s, coinciding with the 1997–98 economic crisis. Where comparable data are available, top income shares in Indonesia are generally higher than in other countries, a finding that is at odds with the view that Indonesia is a relatively egalitarian society. This suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective.

Using estate tax returns data, we observe that the share of women among the very wealthy in the United States peaked in the late 1960s at nearly one-half and then declined to one-third. We argue that this pattern reflects changes in the importance of dynastic wealth, with the share of women proxying for inher? ited wealth. If so, wealth mobility decreased until the 1970s and rose thereafter. Such an interpretation is consistent with technological change driving long term trends in mobility and inequality, as well as the recent divergence between top wealth and top income shares documented elsewhere. (JEL D31, J16, J62, 033) The extent of, and changes in, intergenerational mobility of wealth are central to understanding dynamics of wealth inequality, but are hard to measure. In this paper we argue that the share of women among the wealthiest Americans can be used as a proxy for the importance of inherited rela? tive to self-made wealth. This approach assumes that women tend to inherit rather than make great fortunes. If so, a higher share of women among the wealthy would reflect a rise in inherited wealth at the top, and, thus, lower wealth mobility. Conversely, higher wealth mobility where self-made wealth replaces inherited wealth would result in more men at the top of the wealth distribution. Judged by this proxy, and corroborated by various data sources, wealth mobility decreased in the period 1925? 1969 and increased thereafter. Such a pattern is consistent with an important role for technological change in shaping the wealth distribution, and can provide an explanation for why wealth concentra? tion has remained stable, despite increasing income concentration in the last three decades. Over the past century, the share of women among the very wealthy followed an inverse-U pattern, peaking in the late 1960s. According to estate tax returns, in 1925 one-quarter of the wealthiest 0.01 percent were women. This fraction rose rapidly through World War II (WWII) and then more slowly to peak in 1969, when women neared parity with men. Since then, the decline has been marked. By 2000, women's share had fallen to one-third, its prewar level. While the rise was evident among all wealth groups in the top 1 percent of the wealth distribution, the decline was confined to the very top. Figure IA graphs the share of women for four different groups in the top 1 percent among decedents by year. Figure IB does the same for the "living" population with the help of estate-multipliers (a method that treats death as a random sampling device and uses mortality rates by age and gender to infer the distribution of wealth among the living, as described in the Data Appendix). While the rise in the share of women among the wealthy until the 1960s could reflect improve? ments in women's economic status, labor market gains work against the recent decline. For instance, since the 1970s, the share of women among top earners (top 0.1 percent) has risen by

Based on a re-parameterised Blanchflower–Oswald model this paper uses long macro-data from the OECD countries to discriminate between the Philips curve and the wage curve and examines whether there are any differences in wage dynamics between Europe and the United States. The evidence gives support for the Phillips curve and shows that wage dynamics are no different between the United States and Europe.

This article attempts to contribute to the literature by carefully documenting home‐based work in four sectors in Pakistan in a value chain context. We attempt to isolate and compare the unit remuneration of workers relative to unit value added at the lowest tier of the chain as a measure of income share. These income shares are not adequate to move home‐based workers above the poverty line.

Using taxation statistics, we estimate the income share held by top income groups in New Zealand over the period 1921-2005. We find that the income share of the richest fell during the 1930s, rose again after the Second World War, and steadily declined from the late-1950s until the mid-1980s. From the mid-1980s until the mid-1990s, top income shares rose rapidly, particularly at the very top of the distribution. We present evidence that top marginal tax rates and changing top income shares in Australia and the United Kingdom may have contributed to fluctuations in the income share of the richest 1 percent. Past economic growth does not seem to have a strong effect on the income share of the top percentile group.

The article examines some statistical evidence that supports the view that US labour and capital shares of income return to some long-run historical values. We estimate the long-run share values and the length of time it takes to converge to them. We account for the interdependence of the shares by using a vector error–correction model, and this specification is tested against a VAR alternative using Johansen's method to characterize the properties of the cointegrating vector. We find support for the idea that labour and capital shares have historically been mean reverting, in spite of the fairly restrictive assumptions implied when invoking the Cobb–Douglas production function as the rationale. The cumulative impulse response functions indicate that for capital and labour shares, the time required to revert back to long run levels is in the order of thirty quarters.

Using taxation statistics, we estimate the income share held by top income groups in Australia over the period 1921-2002. We find that the income share of the richest fell from the 1920s until the mid-1940s, rose briefly in the post-war decade, and then declined until the early-1980s. During the 1980s and 1990s, top income shares rose rapidly. At the start of the twenty-first century, the income share of the richest was higher than it had been at any point in the previous fifty years. Among top income groups, recent decades have also seen a rise in the share of top income accruing to the super-rich. Trends in top income shares are similar to those observed among other elite groups, such as judges, politicians, top bureaucrats and CEOs. We speculate that changes in top income shares may have been affected by top marginal tax rates, skill-biased technological change, social norms about inequality, and the internationalisation of the market for English-speaking CEOs.

This paper analyzes environmental reliance, poverty, and climate vulnerability among more than 7,300 households in forest adjacent communities in 24 developing countries. The data are from the detailed, quarterly income recording done by the Poverty Environment Network project. Observed income is combined with predicted income (based on households’ assets and other characteristics) to create four categories of households: income and asset poor (structurally poor), income rich and asset poor (stochastically non-poor), income poor and asset rich (stochastically poor), and income and asset rich (structurally non-poor). The income and asset poor generate 29 percent of their income from environmental resources, more than the other three categories. The income poor are more exposed to extreme and variable climate conditions. They tend to live in dryer (and hotter) villages in the dry forest zones, in wetter villages in the wet zones, and experience larger rainfall fluctuations. Among the self-reported income-generating responses to income shocks, extracting more environmental resources ranks second to seeking wage labor. Given high reliance on forest and other environmental resources, a concerning finding is that, in the Africa subsample (dominated by dry forests), the rate of forest loss is more than four times higher for the income & asset poor compared with the income & asset rich. Special attention should be given to the poorest households in dry areas, predominantly in Africa. They are (already) exposed to more extreme climate conditions, they suffer the highest forest loss, and the forest benefits are at risk in global warming scenarios.

This paper revisits four recent cross-country empirical studies on the effects of inequality on growth. All four studies report strongly significant negative effects, using the popular system generalized method of moments estimator that is frequently used in cross-country growth empirics. This paper shows that the internal instruments relied on by this estimator in these inequality-and-growth regressions are weak, and that weak instrument-consistent confidence sets for the effect of inequality on growth include a wide range of positive and negative values. This suggests that strong conclusions about the effect of inequality on growth— in either direction—cannot be drawn from these studies. This paper also systematically explores a wide range of alternative sets of internal instruments, and finds that problems of weak instruments are pervasive across these alternatives. More generally, the paper illustrates the importance of documenting instrument strength, basing inferences on procedures that are robust to weak instruments, and considering alternative instrument sets when using the system generalized method of moments estimator for cross-country growth empirics.

This paper analyzes environmental reliance, poverty, and climate vulnerability among more than 7,300 households in forest adjacent communities in 24 developing countries. The data are from the detailed, quarterly income recording done by the Poverty Environment Network project. Observed income is combined with predicted income (based on households’ assets and other characteristics) to create four categories of households: income and asset poor (structurally poor), income rich and asset poor (stochastically non-poor), income poor and asset rich (stochastically poor), and income and asset rich (structurally non-poor). The income and asset poor generate 29 percent of their income from environmental resources, more than the other three categories. The income poor are more exposed to extreme and variable climate conditions. They tend to live in dryer (and hotter) villages in the dry forest zones, in wetter villages in the wet zones, and experience larger rainfall fluctuations. Among the self-reported income-generating responses to income shocks, extracting more environmental resources ranks second to seeking wage labor. Given high reliance on forest and other environmental resources, a concerning finding is that, in the Africa subsample (dominated by dry forests), the rate of forest loss is more than four times higher for the income asset poor compared with the income asset rich. Special attention should be given to the poorest households in dry areas, predominantly in Africa. They are (already) exposed to more extreme climate conditions, they suffer the highest forest loss, and the forest benefits are at risk in global warming scenarios.

With 2015 marking the transition from the Millennium to the Sustainable Development Goals, the international community can celebrate many development successes since 2000. Three key challenges stand out: the depth of remaining poverty, the unevenness in shared prosperity, and the persistent disparities in non-income dimensions of development. First, the policy discourse needs to focus more directly on the poorest among the poor. While pockets of ultra-poverty exist around the world, Sub-Saharan Africa is home to most of the deeply poor. To make depth a more central element in policy formulation, easy-to-communicate measures are needed, and this note attempts a step in this direction with person-equivalent measures of poverty. Second, the eradication of poverty in all of its forms requires steady growth of the incomes of the bottom 40 percent. Yet, economic growth, a key driver of shared prosperity, may not be as buoyant as before the global financial crisis. Third, unequal progress in non-income dimensions of development requires addressing widespread inequality of opportunity, which transmits poverty across generations and erodes the pace and sustainability of progress for the bottom 40. To meet these challenges, three ingredients are core to the policy agenda: sustaining broad-based growth, investing in human development, and insuring the poor and vulnerable against emerging risks.

This paper estimates the effect of income inequality on real gross domestic product per capita using a panel of 104 countries during the period 1970–2010. The empirical analysis addresses endogeneity issues by using instrumental variables estimation and controlling for country and time fixed effects. The analysis finds that, on average, income inequality has a significant negative effect on transitional gross domestic product per capita growth and the long-run level of gross domestic product per capita. However, the impact varies by the level of economic development, so much so that in poor countries income inequality has a significant positive effect on gross domestic product per capita.

The paper investigates the structure and dynamics of consumption inequality and inequality of opportunity in Tanzania. The analysis covers the period 2001 to 2012. It reveals moderate and declining levels of consumption inequality at the national level, but increasing inequalities between geographic regions. Spatial inequalities are mainly driven by the disparities of households’ characteristics and endowments across geographic locations. An important part of these endowments results from intergenerational transmission of parental background. Father’s education appears as the most important background variable affecting consumption and income in Tanzania. Without appropriate policy actions, there are few chances for the next generations to spring out of the poverty and inequality lived by their parents, engendering risks of poverty and inequality traps in the country.

Since the early 2000s, Tanzania has seen remarkable economic growth and strong resilience to external shocks. Yet these achievements were overshadowed by the slow response of poverty to the growing economy. Until 2007, the poverty rate in Tanzania remained stagnant at around 34 percent despite a robust growth at an annualized rate of approximately 7 percent. This apparent disconnect between growth and poverty reduction has raised concerns among policy makers and researchers, leading to a consensus that this mismatch needed to be addressed with a sense of urgency. Over the past few years, the National Strategy for Growth and Reduction of Poverty (MKUKUTA) in Tanzania has given high priority to eradicating extreme poverty and promoting broad-based growth. Achieving pro-poor growth has also been widely recognized by the World Bank as a critical strategy for accelerating progress toward its twin goals of eliminating extreme poverty at the global level by 2030 and boosting shared prosperity by fostering income growth among the bottom 40 percent in every country. The official poverty figures announced by the government in November 2013 have revealed that the national strategy against poverty has begun to facilitate reductions. The basic needs poverty rate has declined from around 34 percent to 28.2 percent between 2007 and 2012, the first significant decline in the last 20 years. Identifying the policy mechanisms that have helped to increase the participation of the poor in the growth process and to speed pro-poor growth is therefore important for present and future decision-making in Tanzania on how best to eradicate poverty. Such task requires a rigorous analysis of the evolution of poverty and of the linkages between poverty, inequality, and economic growth. This report uses the availability of the new Tanzanian Household Budget Survey (HBS) for 2011 and 2012, as well as the new rebased GDP figures released in December 2014, as an opportunity to address these issues. More specifically, the report examines the recent trends in poverty and inequality and their determinants and explores how responsive poverty reduction was to economic growth and the obstacles to achieving it.

Since the early 2000s, Tanzania has seen remarkable economic growth and strong resilience to external shocks. Yet these achievements were overshadowed by the slow response of poverty to the growing economy. Until 2007, the poverty rate in Tanzania remained stagnant at around 34 percent despite a robust growth at an annualized rate of approximately 7 percent. This apparent disconnect between growth and poverty reduction has raised concerns among policy makers and researchers, leading to a consensus that this mismatch needed to be addressed with a sense of urgency. Over the past few years, the National Strategy for Growth and Reduction of Poverty (MKUKUTA) in Tanzania has given high priority to eradicating extreme poverty and promoting broad-based growth. Achieving pro-poor growth has also been widely recognized by the World Bank as a critical strategy for accelerating progress toward its twin goals of eliminating extreme poverty at the global level by 2030 and boosting shared prosperity by fostering income growth among the bottom 40 percent in every country. The official poverty figures announced by the government in November 2013 have revealed that the national strategy against poverty has begun to facilitate reductions. The basic needs poverty rate has declined from around 34 percent to 28.2 percent between 2007 and 2012, the first significant decline in the last 20 years. Identifying the policy mechanisms that have helped to increase the participation of the poor in the growth process and to speed pro-poor growth is therefore important for present and future decision-making in Tanzania on how best to eradicate poverty. Such task requires a rigorous analysis of the evolution of poverty and of the linkages between poverty, inequality, and economic growth. This report uses the availability of the new Tanzanian Household Budget Survey (HBS) for 2011 and 2012, as well as the new rebased GDP figures released in December 2014, as an opportunity to address these issues. More specifically, the report examines the recent trends in poverty and inequality and their determinants and explores how responsive poverty reduction was to economic growth and the obstacles to achieving it.

This paper presents series of top income shares in Ecuador from 2004 to 2011 using individual income tax returns and external control totals for income and population from national accounts and census population projections respectively. First, our results show that the income distribution in this country has followed different growth paths between the bottom 90% of the population and the top income groups. The top groups have experienced a steep increase during this period. Second, income in Ecuador is highly concentrated at the very top of the distribution. In 2011, the share of total income accruing to the top 1% was between 12% and 16%. Third, top income shares have followed an inverted U-shape over this short period of time, suggesting a decline of income inequality. Fourth, contrary to evidence in industrialized countries, high-income individuals in Ecuador are mainly capital and business owners.

We investigate the relationship between centralized and decentralized collective demand models applied to consumption within a household with multiple individuals. The centralized program is described by a Bergsonian representation of the household utility function and a household budget constraint, while the decentralized program is described by individual utility maximization subject to an income allocation among individual. The household income allocation among individuals involves an income sharing rule. We show that, in general, income shares are equal to the product of two weights: the Bergsonian weight and a weight reflecting income effects across individuals. We also show that the latter weights play a role in income sharing and in household welfare evaluation when individual preferences depart from quasi-homotheticity. We also examine how individual preferences affect the relationship between centralized and decentralized demand.

While its structure is not that of a typical research paper, this work by Krozer, Moreno and Rubio (2015) makes a contribution to the recent debate about raising the minimum wage in Mexico. The paper provides a comprehensive account of the evolution of income distribution in Mexico as measured by the Gini index, poverty headcount, income per capita across deciles, top and bottom income shares, and, most importantly, the functional distribution of household income (labor, capital and transfer income components). In general, in this policy-oriented paper the authors argue in favor of a minimum wage raise and advocate in the conclusions for a minimum wage initiative approval in the near future...

Internal displacement, rapid growth of urban areas and proliferation of informal settlements are in the spotlight of public policy debate in Afghanistan at present. This pamphlet discusses characteristics, livelihood strategies and vulnerabilities of households living in informal settlements in three urban centers in Afghanistan. These findings summarize the analysis from a joint World Bank-UNHCR ‘research study on IDPs in urban settings’, which illustrates the complexities of displacement and of urban informal settlement growth. Motivated by an existing knowledge gap on these issues, the analysis provides a starting point for discussion among actors directly or indirectly involved with management of problems related to displacement and urban informal settlements, including departments in the Government of Afghanistan, international institutions and stakeholders from civil society. The study documents the significance of displacement as a factor underlying vulnerabilities observed in informal settlements, and identifies IDPs as an extremely deprived segment of the population, even in comparison to the profile of urban poverty in the recent national risk and vulnerability assessment.

The share of income held by the top 1 percent in many countries around the world has been rising persistently over the last 30 years. But we continue to know little about how the rising top income shares affect human well-being. This study combines the latest data to examine the relationship between top income share and different dimensions of subjective well-being. We find top income shares to be significantly correlated with lower life evaluation and higher levels of negative emotional well-being, but not positive emotional well-being. The results are robust to household income, individual’s socio-economic status, and macroeconomic environment controls.

In this paper, we introduce endogenous technological change through RD (iii) steady state per capita growth, income distribution and employment rate are endogenous, and depend on the capitalists’ discount rate, the institutional variables regulating the labor market, and policy variables such as subsidies to RD (v) an increase in workers’ bargaining strength moderately raises the labor share and moderately decreases per-capita growth, while sharply reducing employment: quarterly US fluctuations (1948–2006) in employment and the labor share seem to support this result; (vi) a balanced budget increase in the R&D subsidy also fosters per-capita growth at the expenses of the labor share, even though the corresponding variations might be small.

The paper examines the role of labor market institutions in the rise of income inequality in advanced economies, alongside other determinants. The evidence strongly indicates that de-unionization is associated with rising top earners’ income shares and less redistribution, while eroding minimum wages are related to increases in overall income inequality. The results, however, also suggest that a lack of representativeness of unions may be associated with higher inequality. These findings do not necessarily constitute a blanket recommendation for higher unionization and minimum wages, as country-specific circumstances and potential trade-offs with other policy objectives need to be considered. Addressing inequality also requires a multipronged approach, which should include taxation reform and curbing excesses associated with financial deregulation.

In this paper, we show how the inequality of the income distribution of a population can be measured with the percentile income shares, or with the mean income of each percentile and the mean income of the population, with a negligible error. The results, obtained using the Balance of Inequality index, also apply for the Gini index.

The rise of the super-rich has attracted much political and academic attention in recent years. However, to date there have been few attempts to explain the cross-national variation in the recent rise of very top incomes. Drawing on the World Top Incomes Database, we study the income share of the top 1% in almost all current postindustrial democracies from 1975 to 2012. We find that extreme income concentration at the very top is a predominantly political phenomenon, not the outcome of economic changes. Top income shares are largely unrelated to economic growth, increased knowledge-intensive production, export competitiveness, market size, financialization, and wealth accumulation. Instead, they are driven by various political and policy changes that reflect a decline in the relative power and resources of labor, such as union density and centralization, secular-right governments, and cuts in top marginal income tax rates as well as in public spending on education.