Increase In Wealth Inequality Research Articles

Wealth inequality and economic growth: Evidence from the US and France

Economic inequality, in terms of income or wealth, is one of the most complex and perplexing challenges of our current capitalist economic system. While the dynamic relationship between income inequality and economic growth has been extensively investigated (since the beginning of the last century), the dynamic link between wealth inequality (or wealth concentration) and economic growth has been largely ignored in the literature, taking more attention in recent years. This paper asserts that the accumulation of non-productive assets/luxury goods is an important determinant of wealth inequality, as well as a determinant of the relationship between wealth inequality and economic growth. In this paper our aim is to show that an increase in wealth inequality is associated with a slowdown in economic growth. In particular, the paper shows that there is a negative relationship between wealth inequality and economic growth in France because poor households own a relatively large fraction of non-productive luxury goods. Nevertheless, this is not the case in the US, which is what explains that such negative relationship is not observed there. We conclude that a redistribution of wealth (from the rich to the poor) is important for attaining a sustained economic growth performance.

The Concentration of Personal Wealth in Italy 1995–2016

Abstract We estimate the distribution of wealth in Italy between 1995 and 2016 using a novel source of inheritance tax files, combined with surveys and national accounts. We find that the level of wealth concentration is in line with other European countries; however, its time trend appears more in line with the US, showing a significant increase over the period studied. The country exhibits one of the greatest declines in the wealth share of the bottom 50%. The paper also shows that age plays a marginal role in explaining wealth concentration. Changes in savings, instead, are the predominant force behind the increase in wealth inequality, even at the top. Equity prices also account for a large share of wealth growth above the 99th percentile, whereas changes in house prices play only a minor role. Finally, we document the growing concentration of life-time wealth transfers, and their increasingly favorable tax treatment.

Scientific Discoveries and Technological Innovation are Nobody's Intellectual Property

Scientific discoveries and technological advances emerge from global communities of inves- tigators sharing their ideas and material resources with one another. Individual investigators or groups make important contributions, to be sure, but these advances are incremental; only when ideas and resources are shared with the community at large, so they can modify and combine with other ideas and resources, does the community become fully creative and innovative. While the "intellectual property" that an individual can legitimately lay claim to is thus very modest, it is the source of a supremely valuable cultural reward: the esteem of the creative communities to which the investigator belongs. When governments attempt to foster innovation by the promise of government-enforced patent monopolies, rather than by direct public spending, scientific communities are disrupted, creativity is impaired, the price of goods and services is greatly elevated, wealth inequality increases, and perverse incentives can distort the marketplace. These shortcomings are especially troubling in the case of pharmaceuticals and other essential sectors, where the products are a public good — not just commodities like TVs or new running shoes — and where effective innovation is a matter of basic economic and social justice — not just commercial prosperity.

Secular stagnation: a Classical–Marxian view

We study a model of secular stagnation, income and wealth distribution, and employment in the Classical–Marxian (CM) tradition, with the purpose of drawing a contrast with established Neoclassical accounts of the topic (Piketty 2014, Gordon 2015). In these explanations, which assume full employment of labor at all times, an exogenous reduction in the growth rate g increases the difference with the endogenous rate of return to capital r. The capital–income ratio rises and, if the elasticity of substitution is above one, the wage share falls. Our explanation does not presuppose full employment, and features a crucial tension between profit-driven capital accumulation and wage-driven labor-augmenting technical change: both these features are defining for CM economics and have been emphasized in recent heterodox macro literature. Institutional or technological shocks that lower the wage share initially foster capital accumulation – which is profit-driven – and increase wealth inequality. However, the effect on long-run growth is negative, because a reduction in the wage share lessens the incentives by firms to introduce labor-saving innovation, which is wage-driven. The capital–income ratio must rise in order to restore balanced growth and stabilize employment in the long run; and the increase in wealth inequality is permanent. The ultimate effect on long-run employment depends on the relative strength of the response of technical change versus real wage growth to labor market institutions: we identify a simple condition that delivers either a wage-led or a profit-led long-run employment regime. We then test the model using time-series data for the US (1960–2019): impulse responses from vector error-correction model (VECM) estimators lend support to the main predictions of our model, and point to the employment–population ratio being wage-led.

Unpacking the interconnectedness between macro economic policies and socioeconomic outcomes: A case of monetary policies and wealth inequality in the ASEAN region

This study aims to link the interconnectedness between the dynamic of macroeconomic policies and the distribution of wealth in the Association of Southeast Asian Nations (ASEAN) context through the lens of monetary policy. Time series and panel data from the World Inequality Database (WID) for six ASEAN countries from 2000 to 2021 and the panel vector autoregression (PVAR) were used to analyze the dynamic interactions between monetary policy and wealth inequality. The results suggest that lowering the policy interest rate, increasing inflation, and economic growth lead to a significant increase in wealth inequality in the short run. The impulse response function of the top 1% and top 10% wealthiest are more noticeable than those of the middle 40% and the bottom 50%. Additionally, the study highlights an interesting temporal dynamic, suggesting that the effects of monetary policy don't manifest instantaneously. Instead, these effects evolve gradually. This time lag indicates the complexity of how monetary interventions interact with economic factors and underscores the importance of patience and careful observation when assessing the outcomes of such policy decisions. The study's implications emphasize the importance for policymakers to consider the distributional effects of monetary policy in the long run policy objective.

A model for herd behaviour based on a spatial public goods game

In groups and crowds, individuals have a propensity to replicate the actions of their immediate neighbours, often disregarding rational considerations. This phenomenon is known as herd behaviour, which has been extensively investigated in biological and economic contexts to comprehend the dynamics of fragile systems. Examples of herd behaviour scenarios include the bubble effect in the stock market, animal coordination, and individuals congregating together during emergency situations to avert peril. The understanding of the underlying causes and consequences of individual decision-making in crowd dynamics can mitigate the negative outcomes of these situations. Consequently, models are utilised to propose effective stock market controls and design emergency exits that enable swift responses to crises. This paper presents a spatial game that induces a level of herding in the population, whereby a multiplayer public good game serves as the platform for interaction among individuals. Herding behaviour arises when individuals shift from emulating the most successful strategy to copying the predominant strategy in their neighbourhood. The objective of the game is to investigate how the induced level of herding and the return on investment affect the total wealth, wealth distribution, and level of cooperation in the population. In summary, when herd behaviour is more prevalent, it leads to reduced cooperation and increased wealth inequality. Nonetheless, the outcome is contingent on the initial concentration of states in the simulation.

Emergence of Inequality in Income and Wealth Dynamics.

Increasing wealth inequality is a significant global issue that demands attention. While the distribution of wealth varies across countries based on their economic stages, there is a universal trend observed in the distribution function. Typically, regions with lower wealth values exhibit an exponential distribution, while regions with higher wealth values demonstrate a power-law distribution. In this review, we introduce measures that effectively capture wealth inequality and examine wealth distribution functions within the wealth exchange model. Drawing inspiration from the field of econophysics, wealth exchange resulting from economic activities is likened to a kinetic model, where molecules collide and exchange energy. Within this framework, two agents exchange a specific amount of wealth. As we delve into the analysis, we investigate the impact of various factors such as tax collection, debt allowance, and savings on the wealth distribution function when wealth is exchanged. These factors play a crucial role in shaping the dynamics of wealth distribution.

Changes in wealth inequality in the modern European-American civilization

This study is aimed to analyze changes in wealth inequality in the modern European-American civilization (EAC). The research object includes five parts of the EAC from West to East: USA, Western Europe, Latvia, Ukraine, Russia. Statistical deciles is a tool for measuring and comparing wealth inequality: the top 10% (including the top 1%), the middle 40% and the bottom 50% of the population. 1995 and 2021 are time points for diachronic analysis. The source of empirical information is the data of the World Inequality Database. The study results showed that in different parts of the modern EAC, wealth inequality has different level and trends of changes: from rapid concentrating to deconcentrating. The USA and Russia are vivid examples of rapidly increasing wealth inequality and very strong wealth concentration, although average per adult national wealth in the USA is 4-5 times higher than in Russia. The USA, Western Europe, and Russia differ from each other in the cultural dimensions of Hofstede. The novelty of this study is the use by the authors of economic analysis for a deeper and more comprehensive understanding of the modern EAC, based not only on system-forming religious and cultural differences, but also on economic ones.

Climate shocks and wealth inequality in the UK: evidence from monthly data

  This paper investigates both the linear and nonlinear effects of climate risk shocks on wealth inequality in the UK using the local projections (LPs) method, based on high-frequency, i.e., monthly data. The linear results show that climate risk shocks lead to an increase in wealth inequality in the longer term. The nonlinear results present some evidence of heterogeneous responses of wealth inequality to climate risk variable shocks between high- and low-climate risk regimes. The findings highlight the disproportionate increased burden of climate change on households that are already experiencing poverty, particularly households in high-climate risk areas. As such, measures to mitigate the adverse effects of climate change need to be tailored so as not to overburden the poor.

Exploring Social Capital Level in Regions with Large and Increasing Wealth Inequality: Lesson from Seoul, South Korea.

While wealth inequality is increasing worldwide, social interaction quality among communities is simultaneously decreasing. Although inequality is primarily correlated with the income gap, inequality is also significantly associated with the housing price gap, especially in South Korea. This study explores the correlation between housing price inequality and social interaction levels in Seoul. For this analysis, the housing price Gini coefficient was utilized through the housing transaction price, and social interaction was measured using the Korea Housing Survey. The results of this study indicate that the social interaction level was low in regions with large housing price inequality. Moreover, the social interaction level was low in regions where housing price inequality increased for 10years. Furthermore, the negative correlation between housing price inequality and social interaction was significant only in the lower-asset class. The fact that inequality negatively influences social interactions only in the low-asset class is another aspect of inequality.

Covid-19: did higher trust societies fare better?

Social trust—between governments and people and between individuals—and trust in science were proposed as prerequisites for tackling covid. Others suggested less democratic societies were more able to impose strict rules stopping the virus. These propositions were tested for a group of mainly advanced countries.The dependent variable is cumulated deaths from covid. Findings are broken down between (a) OECD member countries, (b) these and countries having cooperation agreements with it, and (c) all these plus China. They are also broken down by time—between (a) the period before the appearance of “new variants” in late 2020 and (b) the period from then until end September 2021.The best, most parsimonious, models explain nearly half of the changes in the level of deaths. Trust in government improves outcomes, as does interpersonal trust. Vaccine antipathy does not play a role. Also, there is little indication that authoritarian regimes performed better than higher trust societies. In the first period, increasing wealth inequality—indicating a more divided society—is related to higher death rates. Hospital bed availability is important then, but not thereafter. Furthermore, as the pandemic persisted, the importance of pre-existing levels of social trust declined.The paper warns that institutions and cultures cannot easily be transferred from one country to another. Nor would all transfers be desired. It also suggests that some other lessons of what contributed to better outcomes under covid might be relevant for the monkeypox virus—its successor public health emergency.

Is tourism growth able to shrink economic inequalities? A DSGE analysis

The aim of this paper is to investigate the relationship between inbound tourism and economic inequalities (income and wealth). We construct a dynamic stochastic general equilibrium (DSGE) small open-economy model that includes the tourism industry and the housing market. We focus on the recent Icelandic tourism boom, and our simulation results suggest a reduction in income inequality and an increase in wealth inequality. Inbound tourism thus has opposite effects on domestic income inequality and wealth inequality, so the Icelandic government faces a trade-off when formulating tourism-related policies to reduce inequalities, and the consequences may depend on the type of inequality that policymakers prioritize. Lastly, implications are provided based on results.

Public family firms and economic inequality across societies

Research and public interest on economic inequality have grown over the last years. Family firms and the concentration of wealth and power in the hands of a few wealthy entrepreneurial families have been discussed as both a cause and a consequence of economic inequality. Yet, so far, we lack knowledge about the relationship between economic inequality and the prevalence of family firms in an economy. Our study investigates how the share of family-controlled public firms correlates with various measures of income and wealth inequality. The results show that a higher share of public family-controlled firms leads to more income inequality in a country. This effect is particularly pronounced for the middle of the income distribution as opposed to the top quantiles. Redistribution only mitigates this effect to some extent, as the effect is significant for market income and disposable income. We also find that a higher share of family-controlled firms contributes to an increase in wealth inequality. Our results are of economic relevance as, for instance, a one standard deviation change in the share of family-controlled firms leads to an increase of around 1.3–1.5 percentage points in the Gini coefficients for market income, disposable income, and wealth.

The polarization of real estate ownership and increasing wealth inequality in Spain

Abstract Recent research has shown that differences in the distribution of real estate wealth across households are the most important explanation for cross-national variation in wealth inequality. We extend this line of research by looking at change over time and quantifying the importance of two opposing trends related to housing for wealth inequality: declining homeownership rates and increases in multiple property ownership. Our analysis is based on data from the Spanish survey Encuesta Financiera de Familias covering the period 2002–2017. We show how real estate ownership is becoming increasingly polarized: both the share of households without any property at all as well as the share of households with multiple properties is increasing. Decomposition models show, first, that inequality between homeowners and non-owners is becoming a more important component of wealth inequality between households. Second, whereas real estate that is not used by households as their main residence constituted a relatively small part of wealth inequality in 2002, its absolute contribution had almost doubled by 2017. We conclude that household investments in non-residence real estate are an important channel through which wealth inequality increased over time in Spain.

Does local income and wealth inequality affect mortality? A register-based fixed effects study of 58 million person-years.

Aim: The Income Inequality Hypothesis asserts that income inequality causes negative health burdens within wealthy nations. We aimed to test the hypothesis in Norway, examining the relationship between both income and wealth inequality, net of individual economic resources, and individual all-cause mortality. To this day, little is known about the association between wealth inequality and mortality. In Norway, wealth is far more unequally distributed than income and can be a more prevalent indicator of long-term financial security. Methods: We estimated discrete-time event history models from Norwegian register data, covering all Norwegian-born men and women aged 25-84 years during the period 1993-2013. We include fixed effects at the municipal level, adjusting for time-invariant characteristics in the local area. Our data contain approximately 58.5 million person-year observations after sample restrictions. Results: Overall, increased income and wealth inequality (measured using Gini coefficients of individuals' pensionable income and net worth) is not associated with higher mortality risk in Norway. With a one percentage point increase in income inequality, odds ratio (OR) for mortality was estimated at 0.998 (95% confidence interval (CI) 0.996-1.001) for men and 1.002 (95% CI 0.999-1.006) for women. Corresponding OR from increased wealth inequality was 0.998 (95% CI 0.997-1.000) for men and 0.999 (95% CI 0.998-1.001) for women. Conclusions: Our results raise further doubts about the existence of a contextual effect of economic inequality on health, at least in a Nordic setting. Extensive health policies, relatively generous benefits and high levels of trust could potentially function as a buffer against negative health consequences of increased economic inequality in Norway.

The effect of borrower-specific loan-to-value policies on household debt, wealth inequality and consumption volatility: An agent-based analysis

This paper analyses the effects of borrower-specific credit constraints on macroeconomic outcomes in an agent-based housing market model, calibrated using UK household survey data. We apply different Loan-to-Value (LTV) caps for different types of agents: first-time buyers, second and subsequent buyers, and buy-to-let investors. We then analyse the outcomes on household debt, wealth inequality and consumption volatility. The households’ consumption function, in the model, incorporates a wealth term and income-dependent marginal propensities to consume. These characteristics cause the consumption-to-income ratios to move procyclically with the housing cycle. In line with the empirical literature, LTV caps in the model are overall effective while generating (distributional) side effects. Depending on the specification, we find that borrower-specific LTV caps affect household debt, wealth inequality and consumption volatility differently, mediated by changes in the housing market transaction patterns of the model. Restricting investors’ access to credit leads to substantial reductions in debt, wealth inequality and consumption volatility. Limiting first-time and subsequent buyers produces only weak effects on household debt and consumption volatility, while limiting first-time buyers even increases wealth inequality. Hence, our findings emphasise the importance of applying borrower-specific macroprudential policies and, specifically, support a policy approach of primarily restraining buy-to-let investors’ access to credit.

Empires and the acceleration of wealth inequality in the pre-Islamic Near East: an archaeological approach

We present an approach comparing wealth inequality between c. 3000 BCE and 224 CE in the Near East using house sizes and urban area from 1060 houses in 98 archaeological sites. We divide this dataset into two chronological phases, firstly c. 3000-800 BCE and secondly 800 BCE - 224 CE. The first phase is characterised by small, relatively weak states, while the second phase is characterised by major empires and large states, termed as the Age of Empire (AoE). For these two periods, inequality is measured using house size in relation to settlement scaling, and applying, in addition, the Gini and Atkinson indices on house sizes. Results demonstrate that pre-AoE houses have a lower scaling metric (β) that measures house size relative to site size (0.24), while for the AoE the value is higher (0.41). This indicates more rapid median house size expansion during the AoE as cities grew larger. For the pre-AoE, Gini and Atkinson inequality measures result in 0.45 and 0.16, respectively, while the AoE demonstrates 0.54 and 0.24 for the same measures, respectively. This demonstrates greater house size inequality in the AoE. Overall, we see that wealth inequality is not only greater in the AoE, but that increased wealth inequality has a likely power law relationship to increased settlement area. Alternative metrics to minimise data biases affecting results, including median house size and bootstrap sampling, are applied to strengthen these results and overall conclusions.

Quantitative easing in the United States in 2020 after the covid-19: effects on U.S. economy and implications from historical policy about how to improve the policy

The quantitative easing program, an unconventional monetary policy, was implemented in the U.S. for four rounds till 2020 to stimulate the economy during some recessionary times. This paper discussed the instrument and the objective of the four rounds of quantitative easing policy and the similarity of the aims. The paper focused on the impacts on the U.S. economy of the policy, both the positive and the negative. The policy led to economic growth, combating the recession and possibly induced inflation. They also lead to the depreciation of the U.S. dollar in different periods and increase income inequality and wealth inequality. Then this paper discusses the policies that can be used to deal with the problem that may happen during the fourth round of the quantitative easing program, which mainly focuses on supply-side policies.

Closed Loop, Open Borders: Wealth Inequality and Uneven and Combined Development In India

The purpose of this article is to offer an alternative perspective to worsening wealth disparity in India. It does so by critically applying the framework of uneven and combined development in a novel way. It develops two analytical constructs based on internal and external forces that collectively contribute to increasing wealth inequality. The internal force is a closed loop in which the state privileges rent-seeking activities as a response to uneven development in the first place. The external force comprises open borders that not only facilitate wealth and capital flight, which is linked to rent-seeking activities but also deprives the economy of critical resources for development. Together, the specific institutional arrangements associated with the closed loop and the siphoning off of wealth under open borders in the form of capital flight to the global economy exacerbate wealth inequality.

A Wicked War

As war is an eminently political event, the impact of wars on inequality can be seen as an expression of the politics in society. This paper engages with the ongoing literature relating warfare to wealth inequality dynamics in a pre-industrial world. It employs an unbalanced panel of wills in a combined event study and instrument variables research designs to explore the wealth inequality dynamics in Mexico during the Mexican-American War of 1846-1848. The findings suggest that weak public finances and financial crisis led to increasing wealth inequality through military expenditures and national debt. However, the formation of a regressive fiscal-military state and a levelling effect of warfare can coexist. Inequality depends on how war is financed and how destructive to capital and wealth the war is.