Symposium: The Top 1 Percent

Via Tim Taylor, one entry from the symposium:

The Top 1 Percent in International and Historical Perspective, by Facundo Alvaredo, Anthony B. Atkinson, Thomas Piketty and Emmanuel Saez: The top 1 percent income share has more than doubled in the United States over the last 30 years, drawing much public attention in recent years. While other English-speaking countries have also experienced sharp increases in the top 1 percent income share, many high-income countries such as Japan, France, or Germany have seen much less increase in top income shares. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century experienced in virtually all high-income countries. We highlight four main factors. The first is the impact of tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares. The effects of top rate cuts can operate in conjunction with other mechanisms. The second factor is a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Indeed, top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment. The third factor is capital income. Overall, private wealth (relative to income) has followed a U-shaped path over time, particularly in Europe, where inherited wealth is, in Europe if not in the United States, making a return. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States.

More here.

This piece is cross-posted from Economist’s View with permission.

2 Responses to "Symposium: The Top 1 Percent"

  1. George N. Wells   August 11, 2013 at 7:53 am

    The tax question, at least to me, is: "Why should investment/unearned income receive preferential tax treatment?"

    I know the argument about capitalization, but most of the recipients of the tax-preferences given to unearned income are not to Venture Capital providers or investors in IPO's. A case could be made for preferential treatment for gains on this form of capital, but simply trading/speculating does nothing to capitalize firms.

    In a nation that claims to reward: "hard work" the reality is that what is rewarded are the benefits of birth, status of parents, access to elite private education, and who is in your families' network. That is more of a definition of a Plutocracy/Aristocracy than of a society that rewards hard work.

  2. harvey   August 13, 2013 at 10:57 am

    The most glaring reason for the statistical differences in 1% wealth growth between Europe and the USA is the American embrace of little-understood, barely-regulated capitalism-uber-alles.

    And many of the current problems in Europe, private and public, are plainly a result of Europe's giddy embrace of pieces of this exciting American "financial innovation."

    Ironically, the American financiers and 1% sucked plenty of money from their eager European "students." So now, on both continents, the 99% (or 47%) are stuck wallowing in their mess for the foreseeable future.