Economic inequality may affect a wide range of societal outcomes, for example crime rates, economic growth, and political polarization. In this paper we discuss how to model such effects in welfarist ...frameworks. Our main suggestion is to treat economic inequality itself as an externality, which has wide-ranging implications for classical economic theory. We show this through the Mirrlees (1971) optimal non-linear income taxation model, where we focus on a post-tax income inequality externality. Optimal top marginal tax rates are particularly affected by the externality, implying a novel equality dimension to optimal top tax rate design. We propose that inequality’s externality properties may have larger optimal top tax rate implications than standard revenue concerns; our model thus provides a theoretical basis for real-world governmental tax choices that seem irrational under standard optimal taxation models. We also show that the total inequality aversion implied by the current U.S. tax system is insufficient to accommodate both social welfare weights that are decreasing in income and a significant concern for inequality’s externality effects.
•Economic theory often assumes that inequality has no meaningful societal consequences.•Such consequences can be introduced by defining economic inequality as an externality.•Optimal income taxes are drastically modified by an inequality externality.•Optimal top marginal tax rates are particularly affected, and can rise to 90% or above.
We study inequality in the distribution of self-assessed health (SAH) in the United States and China, two large countries that have expanded their insurance provisions in recent decades, but that ...lack universal coverage and differ in other social determinants of health. Using comparable health survey data from China and the United States, we compare health inequality trends throughout the period covering the public health insurance coverage expansions in the two countries. We find that whether SAH inequality is greater in the US or in China depends on the concept of status and the inequality-sensitivity parameter used; however, the regional pattern of SAH inequality is clearly associated with health-insurance coverage expansions in the US but not significant in China.
•Univariate measures can compare inequality in self-assessed health (SAH) across countries.•SAH inequality is calculated using measurement designed for ordinal data for the US and China.•Status measure and inequality-sensitivity parameter determine SAH inequality in the US and China.•SAH inequality is linked to health insurance coverage expansions in the US but not in China.
There is considerable cross‐country variation in levels of household wealth and in wealth inequality. This paper assesses the extent to which these differences can be accounted for by differences in ...the distributions of households' demographic and economic characteristics. A counterfactual decomposition analysis of micro data from five countries (Italy, U.K., U.S., Sweden and Finland) is used to identify the effects of characteristics on component wealth holdings, their value and their distribution. The findings of the paper suggest that the biggest share of cross‐country differences is not attributable to the distribution of household demographic and economic characteristics but rather reflect strong unexplained country effects.
Wealth in the UK Hills, John; Bastagli, Francesca; Cowell, Frank ...
04/2013
eBook
This book examines the key issues connected with the distribution of personal wealth in the UK and why wealth is now such an important factor in social differences and in public policy.
Personal ...wealth in the UK totalled £5.5 trillion by 2010 (£9–10 trillion if occupational pension rights are included). Inheritance flows are equivalent to 4 per cent of national income each year. All households in the wealthiest tenth have more than 75 times the wealth of any of those in the bottom tenth. Absolute differences in wealth levels have increased substantially over the last 15 years, so wealth differences represent many more years of income than in the past, increasing their effects on people’s life chances.
The book presents the most recent information on current wealth inequalities and a detailed discussion of trends in the distribution of wealth. It uses newly available data to compare wealth inequalities in the UK with the USA, Canada, and Sweden. It uses data which track the same people over time to examine trajectories in wealth accumulation over the decade to 2005 and inequalities in inheritances over the same period. It looks at how parental wealth and people’s asset-holdings early in adulthood affect outcomes later in their lives. The final part looks at how policies towards wealth-holding developed historically, and the contradictory ways in which a wide range of public policies relate to people’s wealth levels, including through taxation, means-testing, and the encouragement of saving, and sets out the key current issues for policy towards wealth and wealth inequalities.
The potential impact of smart cards is examined in the context of a standard model of direct and indirect taxation. The distinction between the two types of tax is made in terms of the information ...required to implement them. Electronic cards in general are understood as devices for enriching and certifying information related to individuals and transactions. Smart cards are a subclass of these that may perform additional functions, including dynamic updating and linking of disparate dataseis.
What is inequality? In the late 1990s there was an explosion of interest in the subject that yielded a substantial body of formal tools and results for income-distribution analysis. Nearly all of ...this is founded on a small set of core assumptions - such as the Principle of Transfers, scale independence, the population principle∑ - that are used to give meaning to specific concepts of inequality measurement, inequality ranking and, indeed, to inequality itself. But does the standard axiomatic structure coincide with public perceptions of inequality? Or is the economist's concept of inequality a thing apart, perpetuated through serial brainwashing in the way the subject is studied and taught? In this 1999 book, Amiel and Cowell examine the evidence from a large international questionnaire experiment using student respondents. Along with basic 'cake-sharing' issues, related questions involving social-welfare rankings, the relationship between inequality and overall income growth and the meaning of poverty comparisons are considered.
Abstract
The USA and the UK experienced substantial increases in net wealth in the decade that preceded the financial crisis, largely driven by house-price booms in each country. The distribution of ...these gains across households led to a slight increase in wealth inequality in the USA but a substantial fall in inequality in the UK. We use a decomposition technique to examine the extent to which changes in households’ socioeconomic characteristics explain changes in wealth holdings and wealth inequality. In both countries we find that changes in household characteristics had an equalizing effect on wealth inequality, moderating the increase in the USA and accounting for over one-third of the fall in UK wealth inequality.
Lorenz curves and second-order dominance criteria, the fundamental tools for stochastic dominance, are known to be sensitive to data contamination in the tails of the distribution. We propose two ...ways of dealing with the problem: (1) Estimate Lorenz curves using parametric models and (2) combine empirical estimation with a parametric (robust) estimation of the upper tail of the distribution using the Pareto model. Approach (2) is preferred because of its flexibility. Using simulations we show the dramatic effect of a few contaminated data on the Lorenz ranking and the performance of the robust semi-parametric approach (2). Since estimation is only a first step for statistical inference and since semi-parametric models are not straightforward to handle, we also derive asymptotic covariance matrices for our semi-parametric estimators. PUBLICATION ABSTRACT
P iketty in the long run Cowell, Frank A.
The British journal of sociology,
12/2014, Letnik:
65, Številka:
4
Journal Article
Recenzirano
Abstract I examine the idea of ‘the long run’ in P iketty (2014) and related works. In contrast to simplistic interpretations of long‐run models of income‐ and wealth‐distribution P iketty (2014) ...draws on a rich economic analysis that models the intra‐ and inter‐generational processes that underly the development of the wealth distribution. These processes inevitably involve both market and non‐market mechanisms. To understand this approach, and to isolate the impact of different social and economic factors on inequality in the long run, we use the concept of an equilibrium distribution. However the long‐run analysis of policy should not presume that there is an inherent tendency for the wealth distribution to approach equilibrium.
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