ECONOMIC INEQUALITY: A SURVEY OF RECENT LITERATURE

Darius Kulikauskas

doi:10.15388/ekon.2013.0.1137

Abstract

Abstract. The purpose of this paper is to review the recent literature on economic inequality. In particular, the developments in the fields of economic growth, financial crises, happiness and skill (capital) biased technological progress are surveyed. By using the methods of systematic and narrative literature review and conducting meta-synthesis of the recent studies, it is shows that conventional wisdom is contested in all of the mentioned fields. The rising economic inequality is linked to financial crises as well as the slower and shorter economic growth. The Easterlin paradox is losing support. Skill-biased technological progress is possibly evolved into a capital-biased one.Key words: economic inequality, financial crises, skill-biased productivity, capital-biased productivity, the Easterlin paradox

Highlights

Economic inequality has always been a controversial topic among economists
As the modern technological progress favoured those who had the skills to exploit it, the income gap between the rich and the poor in advanced economies was thought to be determined by the structure of human capital
I have surveyed some recent literature on income inequality and discussed its implications

Summary

Introduction

Economic inequality has always been a controversial topic among economists. High or low levels of income dispersion and their effects on various economic and social phenomena have seen their fair share of treatment. The notion that economic inequality may have caused the biggest financial crisis since the Great Depression has recently been raised by Rajan (2011) In his book, he argues that many of the US consumers reacted to a decrease in their permanent incomes since the early 1980s by reducing saving and increasing borrowing. Moss (2010), using the US data, reveals that there is a remarkable correlation between the increase in income inequality and the total deposits of failed and assisted institutions as a percentage of the GDP (bank failures correlate as well) He shows that the share of income earned by the top 10 percent of households before the 2008 financial crisis is only comparable to the levels that existed before and throughout the Great Depression.

Germany

Findings

Conclusions