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slides_05_DGR_HPV.pdf - Econ 473 Class 5 Inequality Recent...

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Econ 473 Class 5 Inequality: Recent developments
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A snapshot of US inequality in 2007 Read: ıaz-Gim´ enez, Glover and R´ ıos-Rull (2011), Facts on the Distributions of Earnings, Income, and Wealth in the United States: 2007 Update, Federal Reserve Bank of Minneapolis Quarterly Review 34(1), February 2011, 2-31. [DGR] Data source: SCF
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Inequality in the US, 2007 Key results from last class: I Large inequality of earnings, income and wealth I Wealth most unequal I Distributions very skewed, in particular for wealth
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Source: D´ ıaz-Gim´ enez, Glover and R´ ıos Rull (2011)
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Source: D´ ıaz-Gim´ enez, Glover and R´ ıos Rull (2011) All correlations positive except those for transfers differences tend to amplify each other, not compensate. Wealth-income/earnings correlation less high because many wealthy households are retired.
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The rich and the poor Quintiles Top 1st 2nd 3rd 4th 5th 5% 1% Shares of total (%), earnings partition: Earnings -0.1 4.2 11. 20.8 63.5 35.3 18.7 Income 7.3 6.3 10.6 17.7 58.1 34.0 18.6 Wealth 12.9 7.2 7.2 11.8 60.9 40.9 22.0 Shares of total (%), wealth partition: Earnings 6.9 10.8 14.9 19.4 48.0 27.9 12.0 Income 6.6 9.7 13.5 17.8 52.5 32.4 15.8 Wealth -0.2 1.1 4.5 11.2 83.4 60.3 33.6 Source: DGR
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The rich and the poor “The rich and the poor” I Can partition along earnings, income or wealth. Results may differ. I The earnings-poor are quite wealthy; most of them are retired. Note: they on average have negative earnings! (b/o business income) I The income-poor are either very young or very old; often retired or non-workers. I The wealth-poor have substantial labor income, they are young and educated temporarily poor; very different from the earnings-poor! I The rich are rich along all three dimensions. They are highly educated. The earnings-rich receive a lot of business income and almost no transfers. Need to be careful, hard to compare workers, retirees, out-of-the-labor force, different cohorts/age groups. A lot of work focusses on prime age workers only.
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Sources of income across the distribution Quintiles Top 1st 2nd 3rd 4th 5th 2-5% 1% All Income sources (%), earnings partition: Labor 0.2 45.2 76.6 82.9 66.6 63.3 49.1 64.3 Capital 25.1 8.6 5.2 3.7 11.5 12.2 17.7 10.3 Business -2.0 6.5 8.4 7.9 19.6 22.0 31.9 13.9 Transfer 73.4 35.7 8.1 4.5 1.8 1.6 1.2 10.3 Income sources (%), wealth partition: Labor 78.9 81.2 78.6 77.1 51.4 54.7 30.2 64.3 Capital 0.1 0.5 1.0 2.7 18.3 17.8 33.7 10.3 Business 1.9 4.2 6.2 7.5 21.4 21.4 32.0 13.9 Transfer 15.5 12.0 12.4 12.1 8.2 5.5 3.6 10.3 Source: DGR
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Sources of income across the distribution I High earners have mostly labor income. Very high earners also have a lot of business income. This used to be different: capital income. I Low earners have a lot of transfer income. Zero earners (retirees) have a lot of capital income. I The wealth-poor have almost exclusively labor and transfer income. I The wealthy also tend to have a lot of business income – this is often the source of wealth.
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The role of age 0 200 400 600 800 1000 1200 0 20 40 60 80 100 120 140 -­‐25 26-­‐30 31-­‐35 36-­‐40 41-­‐45 46-­‐50 51-­‐55 56-­‐60 61-­‐65 66+ Earnings Income Wealth (right axis) Source: DGR
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Inequality across cohorts (Gini) 0 0.2 0.4 0.6 0.8 1 1.2 -­‐25 26-­‐30 31-­‐35 36-­‐40 41-­‐45 46-­‐50 51-­‐55 56-­‐60 61-­‐65 66+ Earnings Wealth Source: DGR
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Recent changes in inequality ıaz-Gim´
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