1. LABOR ECONOMICS Lecture 6: Inequality – Part II Prof. Saul Hoffman Université de Paris 1 Panthéon-Sorbonne March, 2013

2. inequality & INEQUALITY inequality – by education, race, gender Important big changes – supply/demand analysis Tale of two half-centuries INEQUALITY - the very very very rich and the rest of us The 1% and 0.1% & the Occupy movement 2

3. inequality Supply/Demand of Skill Race Between Technology and Education (Katz/Goldin) In general: – Technological change has increased demand for skill – The SBTC hypothesis/computerization – Educational expansion has increased supply of skill – Equilibrium real wage depends on relative increases – i.e., The Race … A tale of 2 half centuries 3

4. Inequality by Education – 20 th Century 4

5. inequality – New Developments Rising Within-Group Differences exacerbate the between-group diffs 2000s: Differing trends above and below median – 90 th v 50 th – 50 th v 10 th 5

6. INEQUALITY Now the other kind Comparisons across the income distribution – Top 5%, 1% and.1%. What has happened and what (if anything) should we do about it? Facts and policy 6

7. U.S. Income Shares, 1916-2009 – the 1% and 0.1% 7

8. US Income Growth By Income Group 8

9. Inequality and Taxes 9

10. What About France? – Share of Income, Top Earners (from Piketty, JPE, 2003) 10

11. Explanations Why are the rich so much richer than before? Technological Change has created many winner-takes-almost-all opportunities – Scalability of markets/economics of superstars – Now v Then Returns to Human Capital vs Capturing Rents 11

12. Now What? Inequality does serve a purpose How much is necessary? Role of tax reform in broader size of govt and debt debate 12