Inequality & Distribution

This paper finds its origins in two important developments within mainstream economics since the financial crisis, both of which analyze the economy from the viewpoint of what Schumpeter (1954) referred to as the domain of “real” analysis of a modern market economy in contrast to “monetary” analysis.

The Institute for New Economic Thinking held its sixth Annual Conference from April 8 to April 11, 2015, in collaboration with the Organization for Economic Cooperation and Development (OECD) in Paris.

Thomas Piketty and Joseph E. Stiglitz discuss the causes of, consequences of, and remedies for inequality.

We develop adjustments to align the NIPA measures of key household flows with cash flow concepts that better reflect household budgets and demand.

This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then considers whether this represents an increase in the productivity of the top one percent or merely an extraction of economic rent.

How can we reconnect economic success to socioeconomic outcomes?

The Human Capital and Economic Opportunity Global Working Group (HCEO) is an interdisciplinary collaboration incorporating biological, sociological and psychological perspectives into traditional economic questions of inequality and human capital.

Inequality and distribution—areas underserved by mainstream economics—sit at the heart of The Institute’s work. This program brings together researchers from a variety of disciplines to develop alternative approaches to the problem of inequality.

Rana Dasgupta shares his view of the contradictions and tensions of India’s economic and political scenes.

The interaction between social structure and markets remains a central theme in the social sciences. In some instances, markets can build on and enhance social networks’ economic role; in other contexts, markets appear to be in direct competition with social networks. The impact of markets on inequality and welfare is also varying: while markets can sometimes offer valuable outside options to marginalised individuals, in other situations only well connected and better off individuals can benefit from them.

When the adoption of a new labor‐saving technology increases labor productivity, it is an open question whether the economy adjusts in the medium‐term by decreasing employment or increasing output. This paper studies the effects of cheaper electricity on the labor market during the Great Depression.

The ongoing explosion of the incomes of the richest households and the erosion of middle-class employment opportunities for most of the rest have become integrally related in the now-normal operation of the U.S. economy.

How can we better protect Main Street from the externalities of Wall Street?

The turmoil of Brexit and the populist challenge across Europe are consequences of austerity policies that have brought misery to millions of ordinary voters. In this interview first published last January, Servaas Storm warned of the dangers of economic decision making divorced from democracy and from the social consequences of its prescriptions

This research project posits that increasing income concentration and erosion of the middle class are interrelated results of a change in the dominant corporate resource-allocation regime from “retain-and-reinvest” to “downsize-and-distribute,” manifested by massive distributions to shareholders and the disappearance of “collective and cumulative” careers.

This research project studies the evolution of monetary policy since the financial crisis, as regards to changes in implementation mechanisms and use of conventional/unconventional instruments of monetary policy, as well as its mpact on macroeconomic variables, including income distribution.

The objective of this proposal is to build distributional statistics of income and wealth consistent with national accounts aggregates for the United States.

This research project develops a “Money View” analysis of the recent evolution of China’s financial system.

This research project studies the macroeconomic effects of rising inequality by focusing not on top incomes but instead on the economics of the “bottom 99%” which has been squeezed out by rising inequality and falling labor shares.

This research project addresses the problem of inferring causal relationships in economics. It investigates the philosophical roots of the problem and develops econometric tools which take into account the complexity of economic systems.

This research project proposes to revise common interpretations of 20th-century economic history by unearthing the often overlooked story of tax havens and offshore finance, Eurodollars, and export processing zones between the 1870s and 1980s.

This research project explores whether the financialization of the US economy has contributed to rising income inequality through complementary analyses at the individual, firm and industry levels.

This research project aims at analyzing the role of economic models in economic policy-making. Specifically, we investigate the impact of CGE models, related to the TTIP debate, and potential output models, related to fiscal policy in the EU, on politicial decision-making and public debate.

This research project uses macroeconomic data going back to the mid-19th century to analyze issues such as the relation between income distribution and economic growth; and how debt, asset prices, and growth moved together the last 160 years.

This research project lays a foundation for new and better long-run estimates of poverty and inequality around the world through the collection, digitisation, and harmonisation of household budget data.

This research project deepens our understanding of labor market conditions during the Great Depression by assemling data at the national, state, and industry level for jobs created, jobs destroyed, unemployment, employment, and the labor force.

This research project examines how the spatial pattern of inequality in US cities shapes the provision of public transit and more broadly the prospects for a more equitable and sustainable transportation policy.

This research project investigates how gender and race affect the earnings of African American, Latina, and Asian American women in the United States over five decades, from 1970 to 2010.

This research project employs ideas from statistical physics to deal with income and wealth inequality, financial instability, and the distribution of energy consumption around the world.

The tension between efficiency and equilibrium is a central feature of economic systems. In many contexts, social networks mediate this trade-off: an individual’s network position determines equilibrium play, and social relations allow coordination on an efficient norm.

Bill Mitchell presents a coherent analysis of how money is created, how it functions in global exchange rate regimes, and how the mystification of the nature of money has constrained governments, and prevented states from acting in the public interest.

The recently observed surge in wealth doesn’t equate to growth of productive capital. Joseph E. Stiglitz, Branko Milanovic, Paul Krugman and Duncan Foley discuss these issues and more.

There is widespread and growing concern about the availability of good jobs in the U.S. economy. Inequality has been growing for thirty years and is now at levels not seen since the 1920s. Stable and remunerative employment has become harder for U.S. workers to find.

Household economic surveys, such as the German Socio-Economic Panel, notoriously underestimate the degree of income and wealth inequality at the upper end of the distribution.

Rising inequality reduced income growth for the bottom 95 percent of the US personal income distribution beginning about 1980.

An Open Letter to Tim Cook, CEO of Apple

Apple should be returning profits to workers who have invested their time and effort into generating its products and to taxpayers who have funded the investments in the physical infrastructure and human knowledge so critical to Apple’s success.

The paper referenced in this post, “Financialization and U.S. Income Inequality, 1970–2008,” recently was awarded the 2014 Outstanding Article Award from the Inequality, Poverty, and Mobility section of the American Sociological Association.

Anyone who has spent time in a developing country knows the importance of social connections. Among their many roles, these connections help individuals land jobs, and provide them with credit and other forms of support.

With the publication of Thomas Piketty’s Capital in the 21st Century, the American public has become increasingly concerned about the scale and impact of inequality in economic life.

The glass ceiling is typically examined in terms of the distribution of earnings. This column discusses the glass ceiling in the gender distribution of total incomes, including self-employment and capital income. Evidence from Canada and the UK shows we are still far from equality. Though the proportion of women in the top 1% has been rising, the progress is slower, almost non-existent, at the very top of the distribution.

India has for the last twenty years been undergoing a rapid and abiding structural shift in its pattern of development. The transformation of the economy from the period of the license raj to the post liberalization era has wrought many changes, with somewhat ambiguous implications.

The Research Network Macroeconomics and Macroeconomic Policies (FMM) organises its 18th annual conference on Inequality and the Future of Capitalism with introductory lectures on heterodox economics for graduate students.

A nation must accumulate a high-tech knowledge base to prosper.

Thomas Piketty vs. Luigi Pasinetti and John Maynard Keynes

This paper is based on a social accounting matrix (SAM) which incorporates the size distribution of income based on data from the BEA national accounts, the widely discussed 2012 CBO distribution study, and BLS consumer surveys.

Using data on industrial air pollution exposure in the United States, we compute three measures of environmental inequality: the Gini coefficient of exposure, the ratio of median exposure of minorities to that of non-Hispanic whites, and the ratio of median exposure of poor households to that of nonpoor households.

In late 2007, the United States started feeling the effects of the Great Recession. And over the ensuing two years the economic disaster spread across the globe.

In the United States achieving equal opportunity in postsecondary education is typically described in terms of enrolling more underrepresented groups into the selective colleges. The belief is that if this step is accomplished it will have a fundamental impact on the problem of inequality at the national level. However, what if there are not enough places in selective colleges to accomplish this goal? What if the selective colleges do not have enough capacity to make a significant impact in the problem of serving students from underrepresented groups withdemonstrated high abilities?

The term human capital describes a set of skills, strengths and know-how that are valuable—both in the narrow sense of being “commercially valuable” (Lindsey, 2013), and the wider one of contributing to a flourishing, deliberate, purposeful life.As Heckman (2014) puts it: “Skills are capacities to act [emphasis added]…They shapeexpectations, constraints, and information” (p. 6).

Debate about the pension crises has centered on certain questions such as: Are greedy government workers bankrupting states? Arepension-slashing politicians backed by big money saving the day? Or do the budget problems of state and localgovernments have more to do with wasteful corporate subsidies than pensions? What are the real policy solutions to the pressures placed on pensions?”

In recent decades, market values have crowded out non- market norms in almost every aspect of life—medicine, education, government, law, art, sports, even family life and personal relations. Without quite realizing it, we have drifted from having a market economy to being a market society. Is this where we want to be?

The Institute for New Economic Thinking joined the Centre for International Governance Innovation (CIGI) in holding its fifth Annual Conference from April 10 to April 12, 2014 in Toronto.

What is “capital”? To Karl Marx, it was a social, political, and legal category—the means of control of the means of production by the dominant class. Capital could be money, it could be machines; it could be fixed and it could be variable. But the essence of capital was neither physical nor financial. It was the power that capital gave to capitalists, namely the authority to make decisions and to extract surplus from the worker.

Owing to its strong dependence on exports, Germany was among the economies hit hardest by the financial crisis.

We are not “all in it together.”

This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation.

This research project establishes a long-run global picture of economic inequality as revealed by fiscal records and analyzes the long-run drivers of inequality as well as the distributional impact of banking crises.

This research project incorporates recent US data to update empirical analyses of regional growth and utilizes case study strategies of American regions to investigate the underlying causal mechanisms of inequality.

This research project explores the interaction between group identities and decisions to engage in collective action to secure access to public goods, such as education.

This research project designs and evaluates new strategies that can address the issues of financing human capital investments by developing and estimating a unified framework.

This research project analyzes the country-specific effects of inequality within a stock-flow consistent macro model and within a DSGE model with heterogeneous and interacting households.

We analyse the link between income distribution and the current account for the period 1972-2007. We find that rising (top-end) personal inequality leads to a decrease of the current account, ceteris paribus.

Germany’s economic policies are under attack from all sides.

In our two papers, we analyze how changes in personal and functional (wages versus profits) income distribution interact to produce different macroeconomic outcomes in different countries. On the basis of a stock-flow consistent model calibrated for the United States, Germany, and China, simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the United States since the early 1980s can be explained by the interplay of rising (top-end) household income inequality and certain institutions (e.g. easy access to credit, privately financed education and health care systems).

We develop a three-country, stock-flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances.

Inequalities in skills are fundamentally linked to economic and social inequalities.

“You are now leaving the world as you know it.”

What’s behind rapidly worsening inequality in the United States?

Every nation faces the challenge of imagining what a good life means. Sound nutrition, shelter, health care, personal safety, social stability, security of savings, clean air and water, and the development of children are among the elements of what many envision as vital to a happy and healthy society.

The battle for a living wage for the nation’s poorest workers is set against the backdrop of mass unemployment and the highest level of economic inequality in the U.S. in almost a century.