Comments on Income and Wealth Concentration in a Historical and International Perspective Berkeley Symposium on Poverty, the Distribution of Income, and Public Policy

In the Last Two Years… Nine studies on income or wealth shares held by the top percentiles of their distributions Income: Canada, France, Netherlands, Switzerland, UK, and US. Wealth: France, Switzerland, and US. Fascinating work Long time series can help shed light on the effects of taxation, business cycles, and other factors influencing income and wealth distributions. Cross-country differences can further be used to consider the importance of alternative tax systems and institutional environments.

Three Quibbles About Emmanuel’s Paper Tax evasion is minimal on wages? Erard and Ho (2001, JPubE) on “ghosts.” 15% ($11b) as large as the filer tax gap ($73b) in % of the ghosts income is W&S. Most audit studies suggest that tax evasion has declined over time? $232b in taxes were due in 1998 but not collected, 31% more in real dollars than “The health of the federal tax administration system is on a serious long-term downtrend” (C. Rossotti). Likelihood of face-to-face audit: 2% in 1977, 0.1% in Criminal cases have plummeted.

Three Concerns, continued… There’s been only a very modest increase in top wealth shares in the US and UK over the last 25 years? Consistent with SCFs – wealth share of top 1 percent was 31.6% in 1962 and 32.3% in But… 95/50 ratio increased to 15.3 from /50 ratio increased to 68.8 from 35.8.

Emmanuel and Gene Are linked by an interest in similar questions. Gene and colleagues were the first (to my knowledge) to highlight a very important stylized fact in the growth and inequality debate. In the ‘80s inequality and growth were positively correlated: a trend that appears to have continued in the ‘90s. Female labor supply and inequality of property income accounted for the 1980s patterns (focusing on top 10%). Learning from Gene: Don’t devise a Gini measure to account for shifts in the age distribution of the population, or you too can have the following said about your work…

Emmanuel and Gene, cont. Emmanuel extended income and wealth inequality series for the US back to the introduction of the income and estate taxes. Gene extended US poverty statistics, which Census had calculated beginning in 1959, back to 1939 and It is noteworthy how sharply poverty rates fell over this period (earnings poverty from 68.1% in 1939, 53.2, 35.8, 26.9, and it went up to 28.9% in 1979). Among other factors correlated with the increase in 1979 poverty rates, Gene started directing IRP.

Where Emmanuel (and Gene) Might Take This Research Two puzzles The sharp increase in US income inequality did not lead to sharp increases in wealth inequality. Why? Concentration of capital income not fully convincing Explosion in wage and salaries in English-speaking countries but not elsewhere. It is hard, but try to go further in Relating time series to behavioral hypotheses about the level and structure of taxation. What other factors affect inequality and how do these vary cross countries and over time. Can this tell us anything about arguments that inequality erodes social “cohesion” and growth?

Emmanuel and Gene’s Ongoing Research Explain why you care (and others should care) about inequality. Perhaps wealth inequality increases demand, and consequently prices for goods like education that have high wealth elasticities. This could exacerbate existing differences in IG education transfers for education due to wealth differences. Perhaps changing wealth inequality may lead to errors in expectations about future events. Perhaps leading to life-cycle planning failures. Wealth and political participation: Long-standing issue in the interest group, lobbying, and civic participation literatures in political science. Lit focuses on income, would be nice to document effects of wealth.