Persistence of wealth inequality from network effects

Recent studies by economists such as Piketty (2013, 2019) and Atkinson (2015) have contested the well-established view that post-war redistribution policies have been successful in the long term at slowing down the rise of structural inequalities. In reality, the claim goes, they have dealt mostly with reducing inequalities of income through redistribution and have left inequalities of wealth and capital ownership uncontrolled. These, according to their studies, have now risen in the developed world and reached levels more typical of 19th Century Europe. To make matters worse, perceptions of and attitudes towards fighting inequalities as unjust that Rawls saw as based on a wide consensus of citizens' "considered judgments" (Rawls, 1999, p. 17), have changed, leading to them being accepted as the justified and even necessary price to pay for economic growth and as a reward for merit. Economic arguments based on the need for incentives for raising productivity and the "trickle-down effect" have become widely accepted as if the price of economic efficiency should be disconnected from the demands of equity. Meritocracy has provided ethical arguments too. As John Roemer says, "today the most important problem for the social sciences of inequality is understanding how electorates have come to acquiesce to policies which increase inequality… and to try revealing the logic of the I would like to thank the editors of the Special Issue on Rawls for inviting me to develop ideas that I first presented in a previous paper published in French in 2016, "L'état-providence face aux inégalités et la démocratie de propriétaires: une comparaison entre Meade, Rawls, Ackerman et Piketty," Tocqueville Review, 2/2016), as well as in another paper in English in 2018: « Self-development and Social Justice ». I hope to be able to develop these ideas in a future book on property-owning democracy and its philosophical justifications.

We examine the heterogeneous and dynamic impact of China's New Rural Pension Scheme on intergenerational wealth dependence using a nationally representative longitudinal household survey covering the period 2011-13.We adopt an instrumental quantile regressiondiscontinuity design to address the endogeneity of partial compliance of the pension scheme and the observed individual heterogeneity.Overall, we find that the pension scheme smooths wealth dependence between generations in the short term, but strengthens the persistence of assets among the wealthiest households in the medium term.The mechanisms underlying these distributional effects are intergenerational transfers, time reallocation, and filial adjustments of the wealth portfolio.Complementary policy interventions, particularly for the poor across generations, would be needed to neutralize the distributional impact of the pension in terms of intergenerational wealth persistence.

On five hot issues on wealth distribution

Inequality, Concentration of Wealth and the Ownership Structure of Islamic Banks

The publication of Capital in the Twenty-First Century by Piketty (2014) propelled the debate about the prospects of the evolution of income and wealth inequalities in this century. One of the main controversies is about the effects on the income and wealth inequalities of a decrease in the growth rate g. In Piketty (2014), it is claimed that a decrease in g will cause an increase in the wealth inequality, through an increase in the difference r−g, where r is the rate of return on capital. This claim was criticized by many authors. In this chapter, the author presents a neoclassical growth model with heterogeneous agents and uses it to shed more light on this issue. The author’s model generalizes and improves previous models introduced in Piketty and Zucman (2015) and in Aoki and Nirei (2016). The author also presents a result, relating income, wealth, and wage inequalities.

This chapter brings wealth into the picture, again in a comparative perspective, to bring out key features of recent trends and their implications for the prosperity and prospects of ordinary families. Data on the distribution of wealth has been improving in recent years, and new data are exploited here to examine patterns of wealth holding across the income distribution. In doing so, particular attention is paid to the extent and nature of wealth held by middle and lower income working-age families, and how this differs from those higher up the distribution. The chapter also looks at inequality in the distribution of wealth compared with income, and whether wealth inequality has widened as income inequality has grown.

A one-off wealth tax for Belgium: Revenue potential, distributional impact, and environmental effects

Cryptocurrencies often tend to maintain a publically accessible ledger of all transactions. This open nature of the transactional ledger allows us to gain macroeconomic insight into the USD 1 Trillion crypto economy. In this paper, we explore the free market-based economy of eight major cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, Dash, Litecoin, ZCash, Dogecoin, and Ethereum Classic. We specifically focus on the aspect of wealth distribution within these cryptocurrencies as understanding wealth concentration allows us to highlight potential information security implications associated with wealth concentration. We also draw a parallel between the crypto economies and real-world economies. To adequately address these two points, we devise a generic econometric analysis schema for cryptocurrencies. Through this schema, we report on two primary econometric measures: Gini value and Nakamoto Index which report on wealth inequality and 51% wealth concentration respectively. Our analysis reports that, despite the heavy emphasis on decentralization in cryptocurrencies, the wealth distribution remains in-line with the real-world economies, with the exception of Dash. We also report that 3 of the observed cryptocurrencies (Dogecoin, ZCash, and Ethereum Classic) violate the honest majority assumption with less than 100 participants controlling over 51% wealth in the ecosystem, potentially indicating a security threat. This suggests that the free-market fundamentalism doctrine may be inadequate in countering wealth inequality within a crypto-economic context: Algorithmically driven free-market implementation of these cryptocurrencies may eventually lead to wealth inequality similar to those observed in real-world economies.

This article studies the impact of internal migration and remittance flows on wealth accumulation and distribution in 51 rural villages in Nang Rong, Thailand. Using data from 5,449 households, the study constructs indices of household productive and consumer assets with principal component analysis. The changes in these indices from 1994 to 2000 are modeled as a function of households' prior migration and remittance behavior with ordinary least squares, matching, and instrumental variable methods. The findings show that rich households lose productive assets with migration, potentially because of a reduction in the labor force available to maintain local economic activities, while poor households gain productive assets. Regardless of wealth status, households do not gain or lose consumer assets with migration or remittances. These results suggest an equalizing effect of migration and remittances on wealth distribution in rural Thailand.

We study the dynamics of the distribution of overlapping generation economy with finitely lived agents and inter-generational transmission of wealth. Financial markets are incomplete, exposing agents to both labor income and capital income risk. We show that the stationary wealth distribution is a Pareto distribution in the right tail and that it is capital income risk, rather than labor income, that drives the properties of the right tail of the wealth distribution. We also study analytically the dependence of the distribution of wealth, of wealth inequality in particular, on various fiscal policy instruments like capital income taxes and estate taxes. We show that capital income and estate taxes can significantly reduce wealth inequality. Finally, we characterize optimal redistributive taxes with respect to a utilitarian social welfaremeasure. Social welfare is maximized short of minimal wealth inequality and with zero estate taxes. Finally, we study the effects of different degrees of social mobility on the wealth distribution.

Several OECD countries have recently experienced a simultaneous rise in income and wealth inequality and a decline in labor productivity growth. We provide an investigation of these stylized facts that focuses on the weakening of labor market institutions. For this purpose, we develop a two-class, demand-led model of growth and the distribution of income and wealth with endogenous technical change and explicit wage bargaining between workers and capitalists. We derive the conditions under which a worsening of labor market institutions that tilts the distribution of income and wealth in favor of the capitalist class lowers the equilibrium accumulation rate, the growth rate of labor productivity and employment.

There are conflicting theories about whether individuals like or dislike inequality, or in other words, whether living in an unequal country increases or decreases their subjective well-being. Empirical literature has so far focused on income inequality and has not yet reached a consensus. In the present paper, we focus on wealth inequality, an aspect that has so far been overlooked in the happiness literature. The aim of the present paper is to systematically investigate the wealth inequality–happiness relationship and compare the results to the income inequality–happiness association. Furthermore, we focus on different parts of income or wealth distribution, rather than using a single inequality measure. We use data from the integrated World Values Surveys and European Values Surveys for over 50 countries, matched with the World Inequality Database data over the years 1981–2020. Following our analyses, we find some evidence supporting the “tunnel effect” theory: individuals are happier with increases in the top 10% and top 1% shares of wealth and less happy with increases in the middle 40% share of wealth, especially in low- and middle-income countries. In high-income countries, increasing the bottom 50% share of wealth increases individuals’ life satisfaction, suggesting that they favor redistribution.

Recent work on wealth inequality using the capitalization method wherein aggregate wealth totals are distributed proportionately to property income like dividends motivates concern about whether rates of return on assets vary across the income or wealth distribution. Here I use accrued capital gains and imputed rent on homes estimated from the Survey of Consumer Finances to address this issue. Both capital gains and imputed rent form part of total income. I find strong econometric evidence that returns vary directly with wealth level and are considerably higher for very wealthy compared to poorer households. However, I do not find evidence that higher income households receive higher returns once controlling for overall market house price trends. Returns are also strongly related to overall market house price movements, suggesting that timing the market is a key determinant. However, paradoxically, adding housing returns to baseline household wealth reduces overall wealth inequality.

The great world economic and globalisation boom of the pre-First World War era was accompanied by great inequality in the distribution of income and wealth particularly during industrialisation, with the new world European settler economies being no exception. Canadian wealth inequality over the period 1870–1930 was also substantial and is examined using probated estates from the Eastern Judicial District of the province of Manitoba and Wentworth County, Ontario. However, wealth inequality is found to be less pronounced in frontier Manitoba relative to Ontario with higher and more dispersed rates of land ownership in the West as well as lower wealth levels and greater farm employment, as the key factors in this difference. This suggests that the farm economy of pre-First World War Canada was associated with greater equality of wealth. One of the inevitable effects of Canadian industrialisation and economic development was a rise in wealth inequality but the process of western settlement and associated free grants helped mitigate it. By extension, global economic inequality might also have been mitigated during this period by the presence of agricultural frontiers with subsidised land grants.

“Inequality” is a common observation about us, as members of society. In this article, we unify physics with economics by showing that the distribution of wealth is related proportionally to the movement of all the streams of a live society. The hierarchical distribution of wealth on the earth happens naturally. Hierarchy is unavoidable, with staying power, and difficult to efface. We illustrate this with two architectures, river basins and the movement of freight. The physical flow architecture that emerges is hierarchical on the surface of the earth and in everything that flows inside the live human bodies, the movement of humans and their belongings, and the engines that drive the movement. The nonuniform distribution of wealth becomes more accentuated as the economy becomes more developed, i.e., as its flow architecture becomes more complex for the purpose of covering smaller and smaller interstices of the overall (fixed) territory. It takes a relatively modest complexity for the nonuniformity in the distribution of wealth to be evident. This theory also predicts the Lorenz-type distribution of income inequality, which was adopted empirically for a century.