I have a series of posts on the distribution of income, the distribution of wealth, income mobility, and related matters. I don't know Lane Kenworthy's work, but his blog, "Consider the Evidence", looks interesting. He describes himself as "a social scientist who studies causes and consequences of poverty, inequality, employment, mobility, economic growth, and social policy. [He] focus[es] mainly on the United States and other affluent countries."
Showing posts with label Empirical Results - Distribution and Mobility. Show all posts
Showing posts with label Empirical Results - Distribution and Mobility. Show all posts
Inequality And Voting In U.S.A.
The following figure is from Jeffrey M. Stonecash's "The Income Gap" (Political Science and Politics, July 2006):
The upper line is the Gini coefficient, multiplied by 100 to fall on a scale ranging from zero to 100. The higher the Gini coefficient, the moe unequal income is distributed. Notice how it has an upward trend after 1972. The income distribution has been becoming more unequal in the United States for a generation.
The difference is, roughly, the difference between the percentage of the poorest 15% voting Democratic and the percentage of the richest 5% voting Democratic. A higher value here shows that the rich and poor have more different voting patterns.
With the exceptions of 2000 and 2004, the electorate seems to increasingly perceive the Democratic party as for the less affluent as income becomes more unevenly distributed. If you want to live like a Republican, vote Democratic. (Stonecash explains the break in 2000 and 2004 on exceptional circumstances - Clinton's impeachment and Iraq. I wonder if it may have something to do with increasing media concentration and dishonesty. An overwhelming proportion of the mass media in the U.S. is owned by a handful of companies.)
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| Voting Differences Greater When Class Divisions Rise |
The difference is, roughly, the difference between the percentage of the poorest 15% voting Democratic and the percentage of the richest 5% voting Democratic. A higher value here shows that the rich and poor have more different voting patterns.
With the exceptions of 2000 and 2004, the electorate seems to increasingly perceive the Democratic party as for the less affluent as income becomes more unevenly distributed. If you want to live like a Republican, vote Democratic. (Stonecash explains the break in 2000 and 2004 on exceptional circumstances - Clinton's impeachment and Iraq. I wonder if it may have something to do with increasing media concentration and dishonesty. An overwhelming proportion of the mass media in the U.S. is owned by a handful of companies.)
And Every Stinking Bum Should Wear A Crown
Why so much inequality in the United States? I have been reading Hacker and Pierson (2010). (I haven't yet read the commentaries, available for the moment.) I think I have previously made many of their points, as shown below. Hacker and Pierson present some striking graphs taken from work by Piketty and Saez. I reproduce two.
Anybody who still thinks the mainstream story of skills-biased technical change is a reasonable hypothesis is a feckless fop.
Given contract law and property law, government cannot leave the economy to itself. Policy has been driving increased inequality.
Another driver of increased inequality is a change in ideas and social norms. These include faulty ideas on corporate governance, incorrect theories of factor markets, and performative models of finance.
How did ideas that never had sound empirical and theoretical backing become dominant? Part of the explanation must be a propaganda campaign by vile reactionaries, including the suppression of progress in explaining actually existing capitalist economies.
There is an aspect of cumulative causation here. A smaller government is associated with more inequality. And more inequality is associated with the rich and powerful promoting an exploded and evil ideology.
Increased inequality also leads to failures in aggregate demand. A steadily growing economy needs a certain balance to be maintained. The consequences of the failure to maintain such a balance since the end of the post war golden age are all around us.
Reference
Jacob S. Hacker and Paul Pierson, "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States", Politics & Society, V. 38 N. 2 (2010): pp. 152-204
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| Figure 1: Richest 1 Percent's Share of National Pretax Income (Excluding Capital Gains) (Based on Piketty and Saez) |
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| Figure 2: Average Actual Tax Incidence for Top Incomes (Based on Piketty and Saez (2007)) |
Anybody who still thinks the mainstream story of skills-biased technical change is a reasonable hypothesis is a feckless fop.
Given contract law and property law, government cannot leave the economy to itself. Policy has been driving increased inequality.
Another driver of increased inequality is a change in ideas and social norms. These include faulty ideas on corporate governance, incorrect theories of factor markets, and performative models of finance.
How did ideas that never had sound empirical and theoretical backing become dominant? Part of the explanation must be a propaganda campaign by vile reactionaries, including the suppression of progress in explaining actually existing capitalist economies.
There is an aspect of cumulative causation here. A smaller government is associated with more inequality. And more inequality is associated with the rich and powerful promoting an exploded and evil ideology.
Increased inequality also leads to failures in aggregate demand. A steadily growing economy needs a certain balance to be maintained. The consequences of the failure to maintain such a balance since the end of the post war golden age are all around us.
Reference
Jacob S. Hacker and Paul Pierson, "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States", Politics & Society, V. 38 N. 2 (2010): pp. 152-204
Correlation Between Increased Government Size And Equality
The Organization for Economic Cooperation and Development (OECD) has made some data available to everybody. So I thought I would replicate some of my previous analysis. In particular, income inequality is negatively correlated with the size of government (Figure 1). Income is measured by the Gini coefficient, and the size of government is expressed as a percentage of Gross Domestic Product (GDP).
The Gini coefficient is a measure of inequality, with a higher Gini coefficient denoting a more unequal distribution of income. It is defined as follows: sort the population in order of increasing income. Plot the percentage of income received by those poorer than each value of income against the percentage of the population with less than that value of income. This is the Lorenz curve, and it will fall below a line with a slope of 45 degrees going through the origin. The Gini coefficient is the ratio of the area between the 45 degree line and the Lorenz curve to the area under the 45 degree line. A Gini coefficient of zero indicates perfect equality, while a Gini coefficient of unity arises when one person receives all income and everybody else gets nothing. Consequently, the Gini coefficient lies between zero and one.
I take the data as given from the OECD. I'm not worrying about whether income is found per family, household, or individual. Nor am I worrying about whether government expenditures include transfer payments and include both state and Federal spending. I took data from the year 2000 because that seems to be the most recent year with data for both dimensions and in which the Gini coefficient is given for a definite year. The OECD lacks 2000 data in one or another dimension for Iceland, South Korea, Mexico, the Slovak Republic, and Turkey. The plotted points consist of data from Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Among advanced capitalist nations, countries with bigger governments tend to have a more equal distribution of income.
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| Figure 1: Inequality Versus Government Size |
The Gini coefficient is a measure of inequality, with a higher Gini coefficient denoting a more unequal distribution of income. It is defined as follows: sort the population in order of increasing income. Plot the percentage of income received by those poorer than each value of income against the percentage of the population with less than that value of income. This is the Lorenz curve, and it will fall below a line with a slope of 45 degrees going through the origin. The Gini coefficient is the ratio of the area between the 45 degree line and the Lorenz curve to the area under the 45 degree line. A Gini coefficient of zero indicates perfect equality, while a Gini coefficient of unity arises when one person receives all income and everybody else gets nothing. Consequently, the Gini coefficient lies between zero and one.
I take the data as given from the OECD. I'm not worrying about whether income is found per family, household, or individual. Nor am I worrying about whether government expenditures include transfer payments and include both state and Federal spending. I took data from the year 2000 because that seems to be the most recent year with data for both dimensions and in which the Gini coefficient is given for a definite year. The OECD lacks 2000 data in one or another dimension for Iceland, South Korea, Mexico, the Slovak Republic, and Turkey. The plotted points consist of data from Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Among advanced capitalist nations, countries with bigger governments tend to have a more equal distribution of income.
Influence Of Government Size On Income Distribution
I have been reading Philip A. Klein's Economics Confronts the Economy (Edward Elgar, 2006). He presents data in two tables that I thought, when combined, suggest relationships. So I drew the regression lines below. The data on income distribution is from 1998. Total government expenditures as a percentage of GDP is from 1999. Government expenditures include, for example state and local spending in the United States. The graphed data are for the United States, and, in order of decreasing percentage of government spending as a percentage of Gross Domestic Product, Sweden, Denmark, Belgium, Finland, France, Austria, Italy, Netherlands, Norway, Canada, Germany, New Zealand, the United Kingdom, Spain, Ireland, Australia, and Japan. Apparently, in advanced industrial democracies, as government spending directs a greater percentage of resources, the poorest have relatively more income and the richest have relatively less. One can see why the richest would like lackeys to fight the latter tendency.
I haven't finished Klein's book, but I think I'll note two points I find of interest. He argues that when economists advocate for positive analysis of existing economies, they implicitly accept the status quo. This is a value judgement that could be contested. Secondly, when economists limit normative theory to Pareto-improving recommendations, they restrict themselves from commenting on such matters as income distribution and the quality of life of the vast population. (Moving along one of the regression lines probably makes some worse off.)
| Figure 1: Share of Income in Lowest 10% Among Developed Economies |
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| Figure 2: Share of Income in Highest 10% Among Developed Economies |
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I haven't finished Klein's book, but I think I'll note two points I find of interest. He argues that when economists advocate for positive analysis of existing economies, they implicitly accept the status quo. This is a value judgement that could be contested. Secondly, when economists limit normative theory to Pareto-improving recommendations, they restrict themselves from commenting on such matters as income distribution and the quality of life of the vast population. (Moving along one of the regression lines probably makes some worse off.)
Minimum Wages In The U.K.
The Australian Fair Pay Commission's Minimum Wage Research Forum met in Melbourne on 30 and 31 October 2008. Stephen Machin summarized recent experience in the United Kingdom (in the 2008 Minimum Wage Research Forum Proceedings, Volume 1).
Minimum wages were set by industry in the United Kingdom up until 1993. The wage councils were abolished in 1993, except for the Agriculture Wages Board which continues to this day. Outside of agriculture, the UK did not have a minimum wage between 1993 and 1999. From 1999 on, the National Minimum Wage was in effect in the UK, as recommended by the UK Low Pay Commission, established in 1997 by the newly elected Labour government. Notice that the trend in employment visually appears unaffected by the introduction of the national minimum wage and subsequent increases in it. The trend appears the same before as afterwards. This seems like disconfirmatory evidence to me of the simple neoclassical model of wages and employment as determined by supply and demand functions. Some of us know that model is without theoretical foundation anyways.
Hat tip to Bill Mitchell
Minimum wages were set by industry in the United Kingdom up until 1993. The wage councils were abolished in 1993, except for the Agriculture Wages Board which continues to this day. Outside of agriculture, the UK did not have a minimum wage between 1993 and 1999. From 1999 on, the National Minimum Wage was in effect in the UK, as recommended by the UK Low Pay Commission, established in 1997 by the newly elected Labour government. Notice that the trend in employment visually appears unaffected by the introduction of the national minimum wage and subsequent increases in it. The trend appears the same before as afterwards. This seems like disconfirmatory evidence to me of the simple neoclassical model of wages and employment as determined by supply and demand functions. Some of us know that model is without theoretical foundation anyways.
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Hat tip to Bill Mitchell
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