We examine whether economic downturns reshape the distribution of population income giving rise to a "middle-class squeeze." We test this hypothesis using alternative definitions of middle-class, such as income-based measures from the Luxembourg Income Study (LIS), and perceived measures from...

There are two fundamental reasons why factor shares have traditionally been overlooked in the economic literature. First, because of their nature, factor shares are conceptually difficult to define and measure. Second, they have for a long time been perceived as constant across time and space....

This paper analyses the impacts of indirect tax policy reforms on income distribution and poverty in Tanzania by applying a standard static microsimulation model TAZMOD v1.8. The simulations model two indirect tax reforms involving changes to the excise duty and value-added tax rates on...

This paper establishes some stylized facts of the long run relationship between growth and labor shares using historical data for the United States (1898-2010), the United Kingdom (1856-2010), and France (1896-2010). Performing individual country time-frequency analysis, we demonstrate the...

Does the federal minimum wage in Germany introduced in 2015 improve the income situation of low income households and reduce in-work poverty? Previous literature on its distributional impact was either focused on earnings and hourly wages (e.g. Caliendo et al., 2017), or is based on ex-ante...

While skilled immigration ceteris paribus provides an immediate boost to GDP per capita by adding to the human capital stock of the receiving economy, might it also reduce the number of 'good jobs', i.e. those with training, available to indigenous workers? We analyse this issue theoretically...

We investigate whether Chinese household incomes have caught up to those of the middle class in the developed world. Using nationwide survey data for 2002 and 2013, we find considerable catch up. Defining the global middle class as being neither poor nor rich in the developed world, we estimate...

This paper contributes to the literature on secular stagnation by estimating a measure of potential output growth for the post-war US economy derived from a novel model specification that allows for the cyclical interactions between income distribution, represented by the trajectory of the labor...

We assess how tax-benefit policy developments in 2001-2011 affected the household income distribution in seven EU countries. We use the standard microsimulation-based decomposition method, separating further the effect of structural policy changes and the uprating of monetary parameters, which...

Lupu and Pontusson (2011) argue that the structure of income inequality, rather than its level, can explain differences in fiscal redistribution across modern welfare states. Contrary to the assertion that there is robust evidence in support of this proposition, the present paper challenges the...

We describe methods of combining administrative and survey data to improve the measurement of income. We begin by decomposing the total survey error in the mean of survey reports of dollars received from a government transfer program. We decompose this error into three parts, generalized...

Existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden. In this paper we propose a class of progressive smooth functions to replace personal income tax schedules. These functions depend only on three meaningful parameters, and avoid the...

Tax-benefit policies affect household incomes through two main channels: discretionary policy changes and automatic stabilisers. Although a large body of literature has studied the impact of tax-benefit policy changes on incomes, little is known about the link between automatic stabilisers and...

There is increasing scholarly evidence that financialization has contributed to rising income inequality, especially by concentrating income among the affluent and rich. There is less empirical research examining who is losing out to the affluent. This paper fills this gap by examining how three...

In this paper, we explore the relationship between state-level household income inequality and macroeconomic uncertainty in the United States. Using a novel large-scale macroeconometric model, we shed light on regional disparities of inequality responses to a national uncertainty shock. The...

Despite steady growth of the literature on labor income share, empirical studies are mostly limited to country-level analyses. At the sectoral level, data on labor income share are available only for advanced countries. This paper overcomes this constraint and provides some preliminary outcomes...

How have economic development, employment, and labour markets in Asian countries interacted since the publication of Myrdal's Asian Drama? Myrdal rejected, the western approach to and definition of employment and emphasized the role of "informal" employment, but he underestimated the effects of...

This study provides new evidence on top income shares in Germany from the period of industrialization to the present. Income concentration was high in the nineteenth century, dropped sharply after World War I and during the hyperinflation years of the 1920s, and increased rapidly throughout the...

The evolution of the ratio of direct taxation (characterized by progressive rates) over indirect and payroll taxation (characterized by flat rates) is examined together with its distributional consequences for the Bottom 50%, Middle 40% and Top 10% shares of income. Oscillations of this ratio...

Public debates about the rise in top income shares often focus on the growing dispersion in earnings and the soaring pay for top executives and financial-sector employees. But can the change in the marginal distribution of earnings on its own explain the rise in top income shares? Are top...

Existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden. In this paper we propose a class of progressive smooth functions to replace personal income tax schedules. These functions depend only on three meaningful parameters, and avoid the...

What explains the power-law distribution of top incomes? This paper tests the hypothesis that it is firm hierarchy that creates the power-law income distribution tail. Using the available case-study evidence on firm hierarchy, I create the first large-scale simulation of the hierarchical...

This study investigates empirically how human capital, measured by educational attainment, is related to income distribution. The regressions, using a panel data set covering a broad range of countries between 1980 and 2015, show that a more equal distribution of education contributes...

Using a large, register-based panel data set we study gender differences in top incomes in Sweden over the period 1974-2013. We find that, while women are still a minority of the top decile group, and make up a smaller share the higher up in the distribution we move, their presence has steadily...

This paper aims to evaluate the progressivity of different fuel subsidies in Ecuador as well as the budgetary and distributional effects of a potential elimination of such subsidies. Our analysis makes use of ECUAMOD, the tax-benefit microsimulation model for Ecuador, together with...

When measuring income inequality over long periods of time, accounting for population and productivity growth is important. This paper presents three alternative measures of top income shares that more explicitly account for population and income growth than the standard measure. We apply these...

Based on worldly experience, most people would agree that firms are hierarchically organized, and that pay tends to increase as one moves up the hierarchy. But how this hierarchical structure affects income distribution has not been widely studied. To remedy this situation, this paper presents a...

This paper investigates how the heterogenous incomes and preferences of potential donors affect the timing of contribution decisions when it is endogenously determined by contributors themselves. More specifically, we use a simple setting with two donors, Cobb-Douglas preferences, and complete...

We synthesize the findings from several recent papers on South Africa's very high income inequality. These papers use new datasets—including income tax data—and new empirical methods to investigate the drivers of household income and individual earnings inequality in South Africa. Increased...

While there is a broad consensus in the literature that there is a positive correlation between Internet usage and labor income in the richest countries, this link has not been proven in the developing world. This paper uses propensity score matching techniques and household survey data to...

The middle-income class plays a crucial role in socio-economic development and in achieving long-term aspirations articulated in Ambisyon 2040, which envisages a predominantly "middle class" society where no one is poor. However, there is no standard definition for the middle income class that...

South Africa exhibits extreme levels of income inequality and is ranked as one of the most unequal countries in the world. In order to measure these severe levels of inequality, it matters how we account for the different parts of the income distribution. Although the approach has gained...

The cohesiveness of constituent nations in a confederation such as the Eurozone depends on their equally shared experiences. In terms of household incomes, commonality of distribution across those constituent nations with that of the Eurozone as an entity in itself is of the essence. Generally,...

In this paper, we study the finite sample accuracy of confidence intervals for index functional built via parametric bootstrap, in the case of inequality indices. To estimate the parameters of the assumed parametric data generating distribution, we propose a Generalized Method of Moment...

What is the unit of analysis in economics? The prevailing orthodoxy in mainstream economic theory is that the individual is the "ultimate" unit of analysis. The implicit goal of mainstream economics is to root macro-level social structure in the micro-level actions of individuals. But there is a...

Human capital theory is the dominant approach for understanding personal income distribution. According to this theory, individual income is the result of "human capital". The idea is that human capital makes people more productive, which leads to higher income. But is this really the case? This...

Comparative sociologists have long considered occupations to be a key source of inequality. However, data constraints make comparative research on two of the more important contemporary drivers of occupational stratification - globalization and technological change - relatively scarce. This...

Many countries in the Western hemisphere are currently experiencing a backlash against globalization. Most of the research examining the issue has concentrated on international specialization and within-country income inequality as main drivers of the backlash. Doing so, the discussion has...

This paper constitutes an initial attempt to shed light on the role of income distribution in household debt and financial market access in Central, Eastern and Southeastern Europe (CESEE). Using household-level data from the OeNB's Euro Survey for the period 2009-2018, we address the question...

During the last decades, the United States experienced an increase in the number of natural disasters as well as their destructive capability. Several studies suggest a damaging effect of natural disasters on income. In this paper, I estimate the effects of natural disasters on the entire income...

Wie sind die Einkommen und Vermögen in Deutschland verteilt? Auf diese so scheinbar einfache Frage gibt es oft keine einfache Antwort, manchmal nicht einmal eine eindeutige. Verschiedene gesellschaftliche Veränderungen wie die alternde Bevölkerung, die Tendenz zum Alleinleben oder der...

Unlike physical capital, human capital has both embodied and disembodied dimensions. It can be perceived of as skill and acquired knowledge, but also as knowledge spillover effects between overlapping generations and across different skill groups within and across countries. We illustrate the...