Wealth Inequality Research Articles

Економічна нерівність: концепт та підходи до вимірювання

The study of economic inequality has evolved from the classical works of S. Kuznets and A. Atkinson to the modern approaches of A. Sen, J. Foster, A. Shorrocks, G. Palma, and T. Piketty, which take into account the impact of globalization, technological changes, and political decisions. Economic inequality is understood as the uneven distribution of economic opportunities and resources, including income and wealth, among individuals and population groups. Two primary forms of economic inequality are distinguished: income inequality (which reflects differences in current income) and wealth inequality (which focuses on disparities in already accumulated income). Horizontal and vertical dimensions of inequality are identified. The key factors include global factors (globalization, technological progress) and specific ones (macroeconomic conditions, labor market regulation, demographic changes, and redistribution policies). The specific mechanisms for measuring wealth and income inequality are presented. By analyzing the advantages and disadvantages of methodological approaches to measuring economic inequality, it is established that, due to the absence of a universal methodological approach, using a combination of survey data, tax statistics, and national accounts allows for a more comprehensive analysis of inequality. The assessment of the advantages and disadvantages of the Gini index, mean log deviation, Theil index, Palma ratio, and quantile ratios demonstrates that combining simple percentile ratios with complex indices fosters a deeper understanding of the structure and dynamics of inequality. Quintile ratios or the Palm ratio estimate the income gap between the richest and poorest groups, and the Gini ratio and the Theil index reflect changes in income across all segments of the population. It is emphasized on the need to adapt existing inequality indicators in Ukraine to international practices, particularly regarding wealth inequality.

Can marketing reduce inequality? Evidence from marketing science

Reducing inequality is integral to ensuring that no one is left behind. As a discipline, marketing can play a significant role in addressing inequality. To understand the current status and potential of marketing theory and practice to reduce inequality, a comprehensive and systematic literature review is needed. Addressing this gap, we conduct a systematic review of 313 marketing studies on inequalities. Our review highlights that inequality manifests in numerous ways—including consumption, culture, digital, economic, education, gender, geographical, health, income, power, racial, social, socioeconomic, structural, wealth, and general inequalities—and identifies five broad categories of antecedents and outcomes (individual, family, environmental, organization, and country). However, many studies lack specificity in defining and examining these inequalities, hindering the development of targeted interventions. To address this, we propose new definitions for each type of inequality and outline clear pathways for future research. These contributions not only highlight current progress in the field but also establish a roadmap for advancing marketing scholarship on inequality.

Market-oriented reforms and wealth inequality in China

Over the last few decades, China’s growing wealth inequality has mirrored the contemporary global trend. We investigate the effects of China’s market-oriented reforms on wealth inequality using a dynamic general equilibrium model with an incomplete market and idiosyncratic risks. Focusing on the relaxation of private entry and the easing of financial constraints as two pivotal reforms, we show that our model-generated results closely match the actual wealth distribution from 1995 to 2018, with the reform of private enterprise entry accounting for most of the widening wealth disparity. We elucidate the underlying mechanisms of these two reforms using counterfactual simulations and discover that through the savings rate mechanism, the two reforms will collectively form an inverted U-shaped Kuznets curve in wealth inequality as reforms deepen in the future. By calculating the transition dynamics from 1995 to 2035, we confirm that the Kuznets turning point in China lies between 2020 and 2025.

Optimal patent policy and wealth inequality in a Schumpeterian economy

Optimal patent policy and wealth inequality in a Schumpeterian economy

Inequality, social mobility and redistributive preferences

In an online experiment, we provide US citizens with information on both inequality of outcomes and opportunities and test the impact on preferences for redistribution. Information on wealth inequalities in the US increases consensus on a more progressive tax system, whereas information on lack of social mobility in the US increases participants’ preferences for redistribution via fiscal spending. Both informational treatments have a stronger impact when participants also learn that higher inequality is not a necessary part of economic development. All informational treatments have a stronger impact for citizens who underestimate the current level of inequality, trust the government, or belong to the middle-income group, while there is no clear relationship between political position and the impact of information on preferences for redistribution.

The unequal spirit of the Protestant Reformation: particularism and wealth distribution in early modern Germany

AbstractThis paper assesses the impact of the Protestant Reformation on wealth distribution and inequality in confessionally divided Germany, between 1400 and 1800. The Reformation expanded social welfare, but provided it in a particularistic way to “deserving" poor and natives only. This gave Protestantism an ambiguous character in terms of redistribution and its impact on inequality. I develop a theoretical framework of this trade-off between welfare expansion and particularistic provision, and test its implications empirically, using a difference-in-differences and an instrumental variable strategy. In line with the theoretical framework, the analysis documents that the Reformation exacerbated inequality overall by making marginal poor people relatively poorer. This increase in inequality was driven by the introduction of new particularistic poor relief policies in Protestant communities. Economic growth was unlikely to be large enough to compensate poor strata for their losses. Protestantism emerges as an underappreciated driver of preindustrial inequality, long before the onset of industrialisation and modern economic growth.

The discreet charm of the oligarchy: conceptualizing material power and opportunity hoarding

Abstract Stark wealth inequality is consequential for politics, yet the underlying mechanisms are still understudied. We join recent research urging a deeper analysis of how oligarchic interests and material power operate in highly unequal societies by expanding the business power literature to understand new sources of influence based on wealth. We engage in a concept-building exercise for the concept of business power and clarify the similarities and differences between material power and other sources of business power. We then discuss different mechanisms underlying material power and develop the mechanism of opportunity hoarding from the literature on social closure. Opportunity hoarding helps understand how oligarchic interests appropriate well-functioning state institutions for their benefit. We illustrate these mechanisms by analyzing the case of Guatemala, a country with tremendous wealth inequality and pervasive political instability. We highlight the usefulness of our proposed concept structure for analyzing diverse instances of business power and the concept of material power for understanding business influence in highly unequal societies.

The political and economic environment promoting growth in American wealth inequality

AbstractWealth inequality around the world is high and rising. In this paper, we argue that wealth inequality in the United States has been exacerbated by an environment favourable to the ultra‐wealthy. Three distinctive changes in the economic and political landscape have fostered the increase in inequality. First, campaign finance law abruptly changed after the Citizens United Supreme Court decision. This decision gave the ultra‐wealthy an outsized influence on American politics. Second, an increase in competition for executive talent drove CEO salaries to new heights. Demand increased for executives with general leadership skills as corporations grew larger, increasing competition in the market for executive talent. Third, because tax policy in the United States is subject to lobbying influences, those at the top of the wealth distribution are favoured, leading to further concentration in wealth. Our empirical results are consistent with the view that these changes resulted in an increase in disparity, shifting wealth from the 99% to the 1%.

The Economics of Financial Stress

Abstract We study the psychological costs of financial constraints and their economic consequences. Using a representative survey of U.S. households, we document the prevalence of financial stress in U.S. households and a strong relationship between financial stress and measures of financial constraints. We incorporate financial stress into an otherwise standard dynamic model of consumption and labor supply. We emphasize two key results. First, both financial stress itself and naivete about financial stress are important components of a psychology-based theory of the poverty trap. Sophisticated households, instead, save extra to escape high-stress states because they understand that doing so alleviates the economic consequences of financial stress. Second, the financial stress channel dampens or reverses the counterfactual large negative wealth effect on labor earnings because relieving stress frees up cognitive resources for productive work. Financial stress also has macroeconomic implications for wealth inequality and fiscal multipliers.

Poverty induced inequality in nutrition among children born during 2010-2021 in India.

Almost two-fifth of the children in India is stunted and among various factors, poverty differential in child undernutrition is the largest. Using the latest population-based survey of National Family Health Survey, 2015-16 and 2019-21 this paper examined the poverty induced inequality in child stunting across the sub-populations of India. A sample of 213,136 children aged between 0-5 years from NFHS fourth round and 98,222 children in the same age group from the NFHS fifth round constitute the study sample. The wealth index is used as the proxy of household's economic wellbeing and height-for-age (HAZ) z-score of a child is used to identify the stunting status of the child. Box plots are drawn to understand the distributional characteristics of the HAZ score for both the study sample. We calculate the Erreygers corrected concentration index and decomposed the concentration indices using Gonzalo-Almorox and Urbanos-Garrido method. During 2015-16, more than half of the children from the poorest wealth quintile were stunted (52%), compared to 22% among the children from richest wealth quintile. In 2015-16, stunting was as high as 65% among the children of mothers with low stature (height less than 145 cm) and from the poorest wealth quintile whereas, the prevalence was observed 56% from the same sub-population during 2019-21. Among various factors, the concentration index of stunting was observed highest among the children of 36-47 months (-0.28) followed by children of age 48-59 months (-0.27) and among the fully immunized children (-0.25). Similar to NFHS-4, NFHS-5 also shows a predominantly higher socio-economic inequality among 24+ months children and among the fully immunised children. Factors like child age, birth order and sanitation showed positive elasticity. Decomposition analysis of NFHS-4 data shows that due to uneven distribution of wealth, mother's education as a determinant of child stunting solely explained 33% of the overall inequality followed by improved access to sanitation (24%), mother's height (8%) and place of residence (5%). Similar to NFHS-4, NFHS-5 data also shows that mother's education, sanitation, mother's height and place of residence predominantly contributes to the overall wealth inequality in child stunting. In India, poverty differential in child undernutrition is acute among the different sub-population of children. And the concentration of stunted children is higher among the different sub-population with higher wealth poverty. Mother's education, improved sanitation and mother's height explained larger variation in the overall inequalities in child nutrition across India.

A Dynamic Model of Authoritarian Social Control

Abstract Authoritarian regimes often use targeted social control - unequal application of the law to limit expressive freedom and enforce social conformity. At the same time, their methods appear less draconian than in the past. In this model, an authority structures punishments and rewards to compel adherence to its preferred norm. The authority’s commitment is time-limited and depends on imperfectly informative signals of a citizen’ s behavior. Given two citizens with the same observed behavior, the authority imposes harsher punishments on the poorer and/or ex ante dissident individual. Lighter punishments are imposed on the wealthier citizen to prevent “overcompliance.” Wealth inequality increases over time. Some citizens become prosperous “lackeys” while others become destitute from confiscation. In stable regimes with high state capacity, the authority reduces punishments and/or increases rewards to allow citizens to accumulate wealth, leading to social conformity and balanced growth in the long run. In unstable regimes with low capacity, the citizenry splits into groups of wealthy lackeys and destitute proles.

UN Tax Pillars to Address Capital Concentration (through Inheritance Levies) and Wealth Flight (through Exit Taxes) – Implications for the European Union

The article investigates the rising concentration of capital ownership, drawing evidence from the United States, Germany and other European states, and its impact on widening wealth inequality. It warns of modern economies morphing into an “inheritocracy”, where corporate equity and financial assets concentrate across generations. The analysis sheds light on the limitations of income tax systems in addressing wealth inequality in the context of high capital mobility. To tackle these challenges and building on the OECD’s experience with a global minimum tax for large corporations, the article advocates for a UN-led multilateral approach supporting Global Minimum Inheritance Taxes and a Global Minimum Exit Tax to prevent a race to the bottom in taxing high-net-worth individuals and deter wealth flight. By coordinating these taxes at a supranational level, the article supports a fairer tax burden distribution and emphasizes the revenue potential of inheritance levies. Additionally, drawing from the US Expatriation Tax, it explores the legal feasibility of the European Union harmonizing an EU-wide exit tax to mitigate capital flight. Ultimately, these measures have the potential to enhance progressivity across tax systems.

The Impact of Family Wealth on Asset Return: A Moderated Chain Median Model Partially Explaining Wealth Inequality.

Global wealth is distributed highly unequally, and this issue has worsened in recent years. Such inequality threatens human well-being and fundamental values. In response, this paper aims to explore the wealth inequality phenomenon from the perspective of investment psychology. Recognizing wealth return heterogeneity as a crucial source of inequality, the paper establishes a psychological model focused on two investment skill factors that can partially explain this heterogeneity. The theoretical foundation of this model includes the conservation of resources (COR) theory, prospect theory, and performance determinants theory. In our model, risk preference and asset-holding periods sequentially mediate the relationship between family wealth and asset returns. Moreover, risk preference and the disposition effect are identified as serial mediators in this relationship. Financial literacy also moderates the relationship between the risk preference, asset-holding period, and disposition effect. This proposed model not only provides a richer explanation for wealth return heterogeneity through the lens of investment skill but also extends the application of COR theory to investment psychology, thereby enhancing our understanding of resources. Moreover, it offers a novel explanation for the relationship between risk preference and the deposition effect, enriching prospect theory. Finally, the inclusion of financial literacy's role broadens the scope of performance determinants theory.

The Distribution of Land in Luxembourg (1766–1872): Family-Level Wealth Persistence in the Midst of Institutional Change

The paper analyzes family-level wealth inequality and social mobility in Dudelange (Luxembourg) over five generations between 1766 and 1872, a period that saw the end of feudal social relations. While the integration of Luxembourg into the French revolutionary regime produced a reduction in the Gini coefficient for the ownership of land, the social mobility analysis reveals a relative stability of family positions within the land-wealth distribution throughout the period. This shows that family-level transmission mechanisms limit social mobility and strongly advantage those with ancestors owning property wealth, even when there are significant changes in the organization of property relations.

Raising Children, Rising Debt: Mortgage Debt Among American Families

American households owe more than $12 trillion in mortgages, which represents the main source of a family’s debt. Scholars connect mortgages to the desire of families, especially better-off households, to seek housing in neighborhoods with good schools for their children, which tend to be more expensive. Although this perspective assumes a children–mortgage link, we do not know whether having children actually increases mortgage, nor whether and how this relationship varies by household income. To examine these issues, we use eleven waves of the Panel Study of Income Dynamics data between 1997 and 2017 and individual fixed effects, as well as propensity score matching and a quasi-experimental design. Our analyses show that generally, (1) families with children are more likely to have mortgage debt and in greater amounts; (2) it is families in the 60th to 100th income percentile who have the most mortgage debt; and (3) critically, families in the roughly 10th to 60th income percentile have more mortgage debt due to having children. These findings defy assumptions that it is well-to-do families that take on more mortgage debt as part of intensive or concerted cultivation parenting practices. Rather, our findings suggest that families who take on mortgage debt related to their children tend to be those in more economically precarious positions for whom debt for the sake of kids may be a financial burden. As such, our findings provide suggestive evidence that financially intensive parenting may contribute to growing wealth inequality among American families with children.

Does employee ownership promote workers’ wealth accumulation? the case of stock options

ABSTRACT This study examines the consequences of employee ownership for workers’ economic outcomes, with a focus on wealth accumulation. Using large-scale, nationally representative data from the US Survey of Consumer Finances, this study focuses on stock options as a pathway into employee ownership and examines the association between stock options and wealth. A difference-in-differences analysis shows that employees with stock options accumulate greater wealth than employees who do not receive stock options, and the differences are larger at longer tenure. The differences remain statistically significant after accounting for a wide range of job characteristics and sociodemographic attributes. Furthermore, the wealth gap between employees with and without stock compensation widened over time. Finally, results show that stock options are more prevalent among already more socioeconomically advantaged employees. Together, these findings suggest that broadening employee ownership – through stock options or similar avenues – might help in addressing increasing wealth inequality in the United States by giving workers, especially middle- and lower-income workers, a stake in US economic growth.

Is there really an inflation tax? Not for the middle class

One hallmark of U.S. monetary policy since the early 1980s has been moderation in inflation (at least, until recently). How has this affected household well-being? The paper first develops a new model to address this issue. The inflation tax on income is defined as the difference between the nominal and real growth in income. This term is always negative (as long as inflation is positive). The inflation gain on household wealth is the revaluation resulting from asset price changes directly linked to inflation. This term can be positive or negative. The net inflation gain is the difference between the two, which can also be positive or negative. The empirical analysis covers years 1983 to 2019 on the basis of the Federal Reserve Board's Survey of Consumer Finances (SCF) and historical inflation rates. It also looks at the sensitivity of the results to alternative inflation rates, and considers the effects of inflation on real wealth growth, wealth inequality, and the racial wealth gap. The results show that inflation boosted the real income of the middle wealth quintile by an incredible two thirds. In contrast, the bottom two wealth quintiles got lashed by inflation, losing almost half of their real income. Inflation also boosted mean and especially median real wealth growth, reduced wealth inequality, and lowered the racial and ethnic wealth gap. Both the income and wealth results are magnified at higher (simulated) rates of inflation.

The Determinants of Financial Development: Evidence from Bayesian Model Averaging

We examine the determinants of financial development using our global sample and employing different measures of financial development that assess the degree of depth and efficiency of financial intermediaries. We use instrumental variable Bayesian model averaging to test competing theories with this unifying framework. After examining nearly 20 potential determinants of financial development, we find that the rule of law, as well as some of its components, is the most important. In addition, our results suggest that wealth inequality is irrelevant to banking sector development but positively associated with stock market development.

Intergenerational transfers, differential fertility, and wealth inequality

Abstract Rising income and wealth inequality across the developed world has prompted a renewed focus on the mechanisms driving inequality. This paper contributes to the existing literature by studying the impact from life-cycle savings, intergenerational transfers, and fertility differences between the rich and the poor on the wealth distribution. We find that bequests increase the level of wealth inequality and that fertility differences between the rich and the poor amplify this relationship. The counterfactual exercises show that the interaction between bequests and differential fertility is quantitatively important for understanding wealth inequality in the United States.

Impact of Uncertainty Shocks on Income and Wealth Inequality

AbstractWe analyze the distributional consequences of uncertainty shocks in the U.S. economy. While their impact on income inequality appears marginal when measured by a single statistic, there are important variations: inequality between the rich and middle‐income groups decreases, while inequality between the middle and poor‐income groups increases significantly. Additionally, uncertainty shocks increase labor income inequality through higher unemployment rates but simultaneously decrease nonlabor income inequality by reducing business and interest income. Uncertainty shocks reduce disposable income inequality, demonstrating the role of redistribution policy. Finally, they tend to reduce wealth inequality, mainly due to their adverse impact on financial asset prices, predominantly owned by wealthy households.