Wealth inequality, entrepreneurship and industrialization

The paper shows that in a two-good economy with a basic and a luxury good sector inequality is indeed a hindrance to provide sufficient incentive for entrepreneurship to low-wealth economic agents. In contrast to the literature it uses both demand and supply-side explanations for the analysis. An entrepreneurial subsidy policy to encourage entrepreneurship in autarky financed by a lump sum tax on the rich is not very effective in unequal economies since it hardly impacts the welfare. When trade is opened up in the luxury good sector of such an economy the sector might cease to exist. In such a scenario, the rich people being the sole consumers would reap the entire benefits of globalization via low price of the imported luxury good. The paper highlights that the crucial question is: ‘how to globalize’ rather than ‘whether to globalize’ and suggests policy measures to make globalization inclusive.     

Wealth inequality,democracy and economic freedom

Using a novel panel data set from the Credit Suisse on the top wealth shares for 46 sample countries spanning 2000–2014, this paper empirically investigates to what extent wealth inequality influences economic freedom and whether this relationship is affected by the level of democracy. Economic freedom is measured by the Fraser Institute's economic freedom summary index as well as its five major sub-indices, such as government size, property rights, access to sound money, freedom to trade, and regulations. Wealth inequality is measured by the top wealth shares. Trade union density is used as an instrument for wealth inequality. Empirical results suggest that the rising wealth inequality significantly hampers overall economic freedom, property rights protection, freedom to trade, soundness of money and regulatory environment. Furthermore, this negative effect of wealth inequality is reinforced at a lower level of democracy. These findings are robust to alternative measures of wealth inequality, economic freedom, treatment for endogeneity, and model specification.     

Wealth inequality,governance and economic growth

Links between economic growth and inequality are of growing interest for researchers and policy makers. Previous studies of this relationship have focused mainly on inequalities in income rather than in wealth. Yet from many perspectives wealth inequality is arguably more important. Using a new panel data set from Credit Suisse for 45 sample countries over the period 2000–2012, this study investigates the effects of wealth inequality on economic growth. Empirical results from system GMM estimation suggest that the wealth inequality is negatively associated with cross-country economic growth. This result is robust to alternative estimators and measures of wealth inequality, as well as the econometric specification. Further empirical investigation reveals that impact of wealth inequality on growth is mitigated by better governance.     

Wealth inequality and dynamic stability

We explore the link between wealth inequality and stability in a two-sector neoclassical growth model with heterogeneous agents. We show that when the inverse of absolute risk aversion (or risk tolerance) is a strictly convex function, wealth inequality is a factor that favors instability. In the opposite case, inequality favors stability. Our characterization also shows that whenever absolute risk tolerance is linear, as when preferences exhibit hyperbolic absolute risk aversion (HARA), wealth heterogeneity is neutral.     

Wealth inequality and collective action

We study the effect of inequality in the distribution of endowments of private inputs (e.g., land, wealth) that are complementary in production with collective inputs (e.g., contribution to public goods such as irrigation and extraction from common-property resources) on efficiency in a class of collective action problems. We focus on characterizing the joint surplus maximizing level of inequality, making due distinction between contributors and non-contributors, in a framework that allows us to consider a wide variety of collective action problems ranging from pure public goods to impure public goods to commons. We show that while efficiency increases with greater equality within the groups of contributors and non-contributors, so long the externalities (positive or negative) are significant, there is an optimal degree of inequality between these groups.     

Wealth inequality and employment fluctuations

This paper is concerned with the business cycle dynamics in search and matching models of the labor market when agents are ex-post heterogeneous. We focus on heterogeneity caused by different labor market histories and the resulting wealth inequality they generate. We show that this inequality implies wage rigidity relative to a complete insurance economy. The fraction of wealth poor agents prevents real wages from falling too much in recessions, since small decreases in income imply large losses in utility. Analogously, wages rise less during expansions than in models with homogeneous workers as small increases are enough for poor workers to accept job offers. This mechanism reduces the volatility of wages but generates more volatile employment levels.     

Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies

We explore the link between wealth inequality, preference heterogeneity and macroeconomic volatility in a two-sector neoclassical growth model. First we prove that, if agents have homogeneous preferences, when the absolute risk tolerance is a strictly convex (concave) function, sufficiently high (low) levels of wealth inequality may lead to endogenous fluctuations in the neighborhood of the steady state. Second, we consider the effects of preference heterogeneity when agents are homogeneous with respect to their wealth. We show that when the utility function belongs to the HARA class, sufficiently high levels of preference heterogeneity may lead to endogenous fluctuations in the neighborhood of the steady state if the elasticity of intertemporal substitution in consumption is greater than one.     

Wealth inequality and credit markets: evidence from three industrialized countries

Economic theory predicts that changes in the distribution of wealth in an economy affect real interest rates if capital markets are imperfect. We investigate this link for the US, the UK, and Sweden, using multivariate time series analysis that explicitly allows for feedback effects between wealth inequality and real interest rates. Our estimates yield that, over the course of the twentieth century, decreases in wealth inequality led to significant declines in real interest rates. Our results therefore point to the importance of capital market imperfections that arise from moral hazard. They put to question the empirical relevance of a negative interest rate effect of inequality that may arise in variants of these models with high inequality, heterogeneous agents or adverse selection.     

Capital Wealth Taxation: Theory and Application

Using an ls model analysis, the economic effects of implementing a modest taxation rate on capital wealth (3%) are found to be basically favorable: slightly higher output, lower inequality as measured by various Gini coefficients, and higher social welfare according to the three major social welfare functions—Bentham, Nash and Rawls. Implementing capital wealth taxation enables a compensating reduction in the labor-income taxation rate. The single most important consequence of this change is increased labor output among the wealthiest households, whose labor productivity is highest. Even though labor output is reduced among less-wealthy households, the overall effect on aggregate output is positive.     

Wealth Effects, Distribution, and the Theory of Organization

We construct a general equilibrium model of firm formation in which organization is endogenous. Firms are coalitions of agents providing effort and investment capital. Effort is unobservable unless a fixed monitoring cost is paid, and borrowing is subject to a costly state verification problem. Because incentives vary with an agent's wealth, different types of agents become attractive firm members under different circumstances. When borrowing is not costly, firms essentially consist of one type of agent and are organized efficiently. But when the costly state verification problem is sufficiently severe, firm organization will depend on the distribution of wealth: with enough inequality, it will tend to be dictated by incentives of rich agents to earn high returns to wealth, even if the chosen organizational form is not a technically efficient way to provide incentives.Journal of Economic LiteratureClassification Numbers: D2, D31, J41, L2.     

Wealth inequality and financial inclusion: Evidence from South African tax and survey records

Theoretical models show that financial inclusion reduces wealth inequality. Existing empirical models are restricted to estimates using income inequality because of a lack of cross country wealth inequality data. We used 2010-11 and 2014-5 waves of the National Income Dynamics Study combined with South African tax records to estimate wealth and income inequality. Using Re-centered Influence Function regressions on the micro-level records, we confirmed the negative cross-country relationship between financial inclusion and income inequality. Wealth inequality is different. Financial inclusion improved wealth shares of only the middle class. Because of predatory lending, expansion of credit reduced the wealth share of the poor. Improved savings by the middle class, providing better oversight over financial services targeted at the poor and removing impediments to the small business sector are pre-conditions for financial inclusion to reduce wealth inequality.     

Inverse stochastic dominance,inequality measurement and Gini indices

We investigate the relationship between the third degree inverse stochastic dominance criterion introduced in Muliere and Scarsini (1989) and inequality dominance when Lorenz curves intersect. We propose a new definition of transfer sensitivity aimed at strengthening the Pigou-Dalton Principle of Transfers. Our definition is dual to that suggested by Shorrocks and Foster (1987). It involves a regressive transfer and a progressive transfer both from the same donor, leaving the Gini index unchanged. We prove that finite sequences of these transfers and/or progressive transfers characterize the third degree inverse stochastic dominance criterion. This criterion allows us to make unanimous inequality judgements even when Lorenz curves intersect. The Gini coefficient becomes relevant in these cases in order to conclusively rank the distributions.     

论财富的时间原理

从分析时间观、财富观的变迁出发,论证了经济学、时间、财富之间的历史逻辑,认为现代经济学采用的是绝对时间观,财富主要建立在物理时间度量之上,经济学虽以心理分析为基础,但未引入心理时间的研究.针对现代经济学的缺陷,从广义虚拟经济视角对财富与时间的本质进行了重新解读,诠释了时间价值的经济学意义,根据虚拟价值非边际化和信息态的特点,提出财富的时间价值可分解为物理时间价值和心理时间价值.虚拟价值主要用心理时间度量.虚拟价值拟物化和时间寻租是发展虚拟经济的重要法则.     

On factor decomposition of cross-country income inequality: some extensions and qualifications

In a recent paper in this journal Duro and Esteban [Econom. Lett. 60 (1998) 269] have proposed a factor decomposition of the Theil [Economics and Information Theory, Amsterdam, North-Holland, 1967] index of inequality over per capita incomes into the (unweighted) sum of the inequality indexes of the factors in order to measure the contribution of each individual factor to the overall inequality. The purpose of this little note is to extend and qualify the meaning of such a decomposition, to show that the decomposition also holds for another Theil [Economics and Information Theory, Amsterdam, North-Holland, 1967], index of inequality and that both decompositions offer qualitatively the same general results about the contribution of the factors to aggregate inequality when applied to a particular data set, the OECD countries, although quantitative results differ.     

Factor decomposition of cross-country income inequality, 1960–1990

In this paper we present Esteban's 1994 [Esteban, J., 1994. La desigualdad interregional en Europa y en España: descripción y análisis. In: Esteban, J.M^a., Vives, X. (dirs.), Crecimiento y convergencia regional en España y en Europa, Vol. 2, Instituto de Análisis Económico] decomposition of the Theil index of inequality over per capita incomes into the (unweighted) sum of the inequality indices of (i) the productivity per employed worker, (ii) the employment rate, (iii) the active over working-age population rate, and (iv) the working-age over total population rate. Each of these factors clearly have different meanings for analysis as well as for policy. We apply this factoral decomposition to a set of 120 countries. We also contrast the empirical findings with the results obtained for the 23 OECD countries. [OECD, Labour Force Statistics, Several issues, Paris].     

社会财富及其源泉--使用价值形成论

在现代发达市场经济和高技术的生产过程中，呈现出生产要素的多维化：除了劳动力、工具力，对象力，科学力而外，管理力，环境力等成为生产过程的有效因素，并且对产品使用价值和社会形成发挥重要作用，从而表现出生产方式进步中社会财富新泉源到开发和富源的多样化。主要依托科学力（知识力）创造财富是人类进行财富创新的最高形式，也是财富创造效率最高的方式，在使用价值形成中非劳动要素作用和贡献的增大和活劳动的作用，功能的减缩，并不意味着劳动创造价值命题的失效，劳动是财富生产的原动力，是要素力的启动力，是多要素有机结合的粘合力。     

Consumption, Wealth, and Indebtedness in the Context of Uncertainty: The Consumption Function Meets Portfolio Theory

The objective of this paper is to provide a sound theoretical framework for the empirical analysis of consumer indebtedness, by integrating Portfolio theory with the Life-Cycle hypothesis (LCH) model of consumption. Modern versions of this LCH theory almost always assume that utility is additive over time, but in this study, the multiplicative Cobb–Douglas function is used. The new synthesis also explains the stochastic properties of consumption more fully and clearly than previous studies, in particular the uncertainty arising from rates of return on risky assets. The new theory will also help to improve the explanation of the surprise changes in consumption because these sources of risk are incorporated explicitly into the analysis.