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Lecture 23 Slides Long

Lecture 23 Slides Long - Economics 134 ChrisEna Romer...

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L ECTURE ’23 Income’Inequality’and’ Macroeconomic’Behavior’ April’18,’2013’ Economics’134’Chris±na’Romer’ Spring’2013’David’Romer’
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Announcements’ Short’paper’is’due’on’Tuesday,’April’23 rd .’ Remember’to’bring’a’hard’copy’to’lecture’and’to’ submit’your’paper’online.’See’the’instrucEons’in’the’ ‘announcements±’secEon’of’the’course’website.’
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I.’O VERVIEW
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Top’Decile’Income’Share,’1917–2010’ 25% 30% 35% 40% 45% 50% 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Top 10% Income Share Including capital gains Excluding capital gains
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0% 5% 10% 15% 20% 25% 1913 1918 1923 1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 Share of total income accruing to each group Top 1% (incomes above $352,000 in 2010) Top 5-1% (incomes between $150,000 and $352,000) Top 10-5% (incomes between $108,000 and $150,000) Decomposing’the’Top’Decile’Income’Share’
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The’Race’between’Educa±on’and’Technology’ Technological’change’tends’to’increase’inequality.’ Increases’in’educa±on’tend’to’decrease’inequality.’ In’the’1950s’and’1960s,’the’two’forces’roughly’ balanced.’ Star±ng’around’1970,’increases’in’educa±on’slowed,’ so’the’eFects’of’technological’change’dominated.’
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Other’Factors’that’May’Have’Contributed’ Somewhat ’to’the’Rise’in’Inequality’ Weakening’unions’and’falling’relaEve’minimum’ wages.’ Increases’in’internaEonal’trade.’ Changes’in’social’norms.’
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Top’Decile’Income’Share,’1917–2010’ 25% 30% 35% 40% 45% 50% 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Top 10% Income Share Including capital gains Excluding capital gains
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II.’I S ’I NEQUALITY A ’S OURCE OF ’R ECESSIONS AND / OR ’F INANCIAL ’C RISES ?’
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Two’Views’of’the’Role’of’Inequality’ Inequality’is’important’for’many’things,’but’it’is’not’ central’to’understanding’short-run’fluctuaEons’and’ Fnancial’crises’ High’levels’of’inequality’cause’recessions’and’crises.’
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Idea’#1’ Because’the’rich’spend’a’smaller’fracEon’of’their’
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