Matthew P. Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- chapter
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.003.0007
- Subject:
- Political Science, Public Policy
Has rising income inequality or rising household debt or a housing price bubble played a role in serious economic decline in the past? Did a rising average propensity to consume, and thus a falling ...
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Has rising income inequality or rising household debt or a housing price bubble played a role in serious economic decline in the past? Did a rising average propensity to consume, and thus a falling rate of saving, warn of unsustainable consumption leading to a serious economic decline before the present recession? Those are the questions considered in this chapter, and they all receive the same answer: yes.Less
Has rising income inequality or rising household debt or a housing price bubble played a role in serious economic decline in the past? Did a rising average propensity to consume, and thus a falling rate of saving, warn of unsustainable consumption leading to a serious economic decline before the present recession? Those are the questions considered in this chapter, and they all receive the same answer: yes.
Matthew P Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- book
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.001.0001
- Subject:
- Political Science, Public Policy
This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, ...
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This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, indeed surging, household debt in the 1990s and 2000s contributed to the financial collapse, none have related rising household debt to the dramatic rise in income inequality. The rise in household debt was not the result of a rash of luxury, but instead was the effort to maintain consumption despite stagnant incomes. Part of that effort is reflected in the unprecedented drop in the rate of saving from around 10 percent to near zero. It is also reflected in the sharp rise of relative spending on three necessities of a middle class lifestyle -- housing, education, and health. Some of that jump in relative spending was brought about by steep price increases. Their prices were bid up by those whose incomes had skyrocketed. Thus to the usual suspects causing the recession–unsustainable residential mortgage debt, low interest rates, predatory lending and the housing price bubble–income inequality must be included. The second story is that mainstream economists have misunderstood the causes of the recession because they have adhered to a macroeconomic theory that ignores the role of income distribution. Mainstream economic theory maintains that inequality has no impact on macroeconomic outcomes. That view is incorrect and led most economists to ignore the serious consequences of rising inequality, despite the striking parallel with the Great Depression.Less
This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, indeed surging, household debt in the 1990s and 2000s contributed to the financial collapse, none have related rising household debt to the dramatic rise in income inequality. The rise in household debt was not the result of a rash of luxury, but instead was the effort to maintain consumption despite stagnant incomes. Part of that effort is reflected in the unprecedented drop in the rate of saving from around 10 percent to near zero. It is also reflected in the sharp rise of relative spending on three necessities of a middle class lifestyle -- housing, education, and health. Some of that jump in relative spending was brought about by steep price increases. Their prices were bid up by those whose incomes had skyrocketed. Thus to the usual suspects causing the recession–unsustainable residential mortgage debt, low interest rates, predatory lending and the housing price bubble–income inequality must be included. The second story is that mainstream economists have misunderstood the causes of the recession because they have adhered to a macroeconomic theory that ignores the role of income distribution. Mainstream economic theory maintains that inequality has no impact on macroeconomic outcomes. That view is incorrect and led most economists to ignore the serious consequences of rising inequality, despite the striking parallel with the Great Depression.
Matthew P. Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- chapter
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.003.0001
- Subject:
- Political Science, Public Policy
Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong ...
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Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong parallel of run-up to Great Recession with run-up to Great Depression.Less
Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong parallel of run-up to Great Recession with run-up to Great Depression.
Yue Chim Richard Wong
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9789888139446
- eISBN:
- 9789888180349
- Item type:
- chapter
- Publisher:
- Hong Kong University Press
- DOI:
- 10.5790/hongkong/9789888139446.003.0016
- Subject:
- Society and Culture, Asian Studies
Understanding the factors and implications of income inequality in our society is of paramount importance. It tells us what has to be done to reduce inequality and alleviate the poverty problem. This ...
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Understanding the factors and implications of income inequality in our society is of paramount importance. It tells us what has to be done to reduce inequality and alleviate the poverty problem. This chapter centres on the economic aspects of income inequality, and examines this phenomenon through the revenue perspective and the concept of positive economics. Inequality is considered the result of a race between technology and education, and in general, inequality occurs when educational changes lag far behind technological advances. Increasing the supply of skilled manpower can be achieved in four distinct ways, and they are instrumental in reducing income inequality in the long run. Education is construed by the author as an indispensable vehicle for arresting the trend of growing income inequality and promoting economic growth.Less
Understanding the factors and implications of income inequality in our society is of paramount importance. It tells us what has to be done to reduce inequality and alleviate the poverty problem. This chapter centres on the economic aspects of income inequality, and examines this phenomenon through the revenue perspective and the concept of positive economics. Inequality is considered the result of a race between technology and education, and in general, inequality occurs when educational changes lag far behind technological advances. Increasing the supply of skilled manpower can be achieved in four distinct ways, and they are instrumental in reducing income inequality in the long run. Education is construed by the author as an indispensable vehicle for arresting the trend of growing income inequality and promoting economic growth.
Paul W. Posner
- Published in print:
- 2018
- Published Online:
- May 2019
- ISBN:
- 9781683400455
- eISBN:
- 9781683400677
- Item type:
- chapter
- Publisher:
- University Press of Florida
- DOI:
- 10.5744/florida/9781683400455.003.0003
- Subject:
- Society and Culture, Latin American Studies
Flexibility proponents assert that rigid Latin American labor markets impede economic expansion and job growth; they advocate reforming labor codes through increased flexibility. Critics argue that ...
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Flexibility proponents assert that rigid Latin American labor markets impede economic expansion and job growth; they advocate reforming labor codes through increased flexibility. Critics argue that heightened labor flexibility exacerbates inequality without expanding employment. From this perspective, precarious employment and inequality are remedied by strengthening labor’s bargaining power. Chile’s maintenance of flexible labor reforms since the Pinochet dictatorship make it appropriate for evaluating these competing perspectives. Based on flexibility proponents’ predictions, we should expect increased formal sector employment over time, particularly among the least skilled Chilean workers, as well as reduced wage inequality. Yet the rate of unemployment among least-skilled workers in Chile remains essentially unchanged since the democratic transition, as does income inequality. These conditions persist despite a highly flexible labor market. Thus, Chile’s continued adherence to a flexibilized labor market should be understood not in terms of its capacity to reduce inequality or generate employment. Rather, it should be understood as the product of several interrelated factors: (1) the business sector’s ability to protect its interests; (2) the Concertación’s conscious limitation of threats to the business sector’s interests; and (3) the weakness of organized labor, resulting from the perpetuation of the Pinochet-era labor regime.Less
Flexibility proponents assert that rigid Latin American labor markets impede economic expansion and job growth; they advocate reforming labor codes through increased flexibility. Critics argue that heightened labor flexibility exacerbates inequality without expanding employment. From this perspective, precarious employment and inequality are remedied by strengthening labor’s bargaining power. Chile’s maintenance of flexible labor reforms since the Pinochet dictatorship make it appropriate for evaluating these competing perspectives. Based on flexibility proponents’ predictions, we should expect increased formal sector employment over time, particularly among the least skilled Chilean workers, as well as reduced wage inequality. Yet the rate of unemployment among least-skilled workers in Chile remains essentially unchanged since the democratic transition, as does income inequality. These conditions persist despite a highly flexible labor market. Thus, Chile’s continued adherence to a flexibilized labor market should be understood not in terms of its capacity to reduce inequality or generate employment. Rather, it should be understood as the product of several interrelated factors: (1) the business sector’s ability to protect its interests; (2) the Concertación’s conscious limitation of threats to the business sector’s interests; and (3) the weakness of organized labor, resulting from the perpetuation of the Pinochet-era labor regime.
Matthew P. Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- chapter
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.003.0008
- Subject:
- Political Science, Public Policy
Rising income inequality has had deleterious effects upon household debt and saving. The overhang of debt and revived saving by households post 2007 will be a drag on economic expansion for some ...
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Rising income inequality has had deleterious effects upon household debt and saving. The overhang of debt and revived saving by households post 2007 will be a drag on economic expansion for some years. The adverse aftereffects of the Great Recession will be much longer than those of the recent past. One thing is clear: the cause of the Great Recession is mostly not economic—it is mostly political. So the solution, if ever devised, will be mostly political. Another financial and economic crash just as bad or worse than the last might focus Congress on correcting causes of income inequality. I present a plea for a more fact-based economics than an authority-based economics. Why have today’s economists failed to jettison the mainstream theory of consumption in the face of so much evidence to the contrary?Less
Rising income inequality has had deleterious effects upon household debt and saving. The overhang of debt and revived saving by households post 2007 will be a drag on economic expansion for some years. The adverse aftereffects of the Great Recession will be much longer than those of the recent past. One thing is clear: the cause of the Great Recession is mostly not economic—it is mostly political. So the solution, if ever devised, will be mostly political. Another financial and economic crash just as bad or worse than the last might focus Congress on correcting causes of income inequality. I present a plea for a more fact-based economics than an authority-based economics. Why have today’s economists failed to jettison the mainstream theory of consumption in the face of so much evidence to the contrary?
Venkat Venkatasubramanian
- Published in print:
- 2017
- Published Online:
- January 2019
- ISBN:
- 9780231180726
- eISBN:
- 9780231543224
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231180726.003.0001
- Subject:
- Economics and Finance, Econometrics
Chapter one provides a summary of the global trends in income inequality and ask what kind income distribution there ought to be, under ideal conditions, in a free market society. The chapter also ...
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Chapter one provides a summary of the global trends in income inequality and ask what kind income distribution there ought to be, under ideal conditions, in a free market society. The chapter also raises three other fundamental questions regarding the fairness, stability and optimality of such a distribution. Since these questions cannot be answered by mainstream economic theories, or by econophysics, we outline the development of our novel theory to address them.Less
Chapter one provides a summary of the global trends in income inequality and ask what kind income distribution there ought to be, under ideal conditions, in a free market society. The chapter also raises three other fundamental questions regarding the fairness, stability and optimality of such a distribution. Since these questions cannot be answered by mainstream economic theories, or by econophysics, we outline the development of our novel theory to address them.
Francesco Caselli, Mário Centeno, Álvaro Novo, and José Tavares
- Published in print:
- 2016
- Published Online:
- August 2016
- ISBN:
- 9780198754688
- eISBN:
- 9780191816260
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198754688.003.0008
- Subject:
- Economics and Finance, Macro- and Monetary Economics
In this chapter, the policy consequences of inequality in the Eurozone are measured, analysed, and discussed. Market income inequality among European households is lower than in the USA, where there ...
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In this chapter, the policy consequences of inequality in the Eurozone are measured, analysed, and discussed. Market income inequality among European households is lower than in the USA, where there are relatively more households at both ends of the distribution. However, the distribution of income is more similar among US regions than among Eurozone countries. European incomes are ‘geographically clustered’, with the poor being concentrated in a few (especially Southern) countries. Furthermore, although market income inequality is high among wealthier Northern countries, their redistributive policies are effective in reducing inequality. In contrast, redistribution in Southern Europe is less far reaching, reinforcing the geographical clustering. These patterns imply that forging a common European approach to inequality and redistribution may be much more difficult than hitherto appreciated.Less
In this chapter, the policy consequences of inequality in the Eurozone are measured, analysed, and discussed. Market income inequality among European households is lower than in the USA, where there are relatively more households at both ends of the distribution. However, the distribution of income is more similar among US regions than among Eurozone countries. European incomes are ‘geographically clustered’, with the poor being concentrated in a few (especially Southern) countries. Furthermore, although market income inequality is high among wealthier Northern countries, their redistributive policies are effective in reducing inequality. In contrast, redistribution in Southern Europe is less far reaching, reinforcing the geographical clustering. These patterns imply that forging a common European approach to inequality and redistribution may be much more difficult than hitherto appreciated.
Wiemer Salverda, Brian Nolan, Daniele Checchi, Ive Marx, Abigail McKnight, István GyörgyTóth, and Herman van de Werfhorst
- Published in print:
- 2014
- Published Online:
- April 2014
- ISBN:
- 9780199687435
- eISBN:
- 9780191767135
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199687435.003.0001
- Subject:
- Economics and Finance, Public and Welfare
This chapter provides the introduction to a collection of 11 comparative chapters and a concluding chapter which, based on 30 country studies (25 European, USA, Canada, Australia, Japan, Korea; ...
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This chapter provides the introduction to a collection of 11 comparative chapters and a concluding chapter which, based on 30 country studies (25 European, USA, Canada, Australia, Japan, Korea; reported in the companion volume Nolan et al. 2013), look at the evolution of inequalities, their social and political impacts, and national policies regarding inequality. Four chapters consider the evolution of inequalities of income and their drivers, the role of earnings and employment, the inequalities of wealth, and those of education. Four subsequent chapters address the social and political impacts in a wide range of fields, such as poverty and social exclusion, health and housing, attitudes towards inequality, trust, and political legitimacy. Next, policies of redistribution, job provision and public services are discussed in two chapters, followed by a chapter on educational policies and inequality. The chapter explains the approach and its challenges and ends with a summary overview of inequalities.Less
This chapter provides the introduction to a collection of 11 comparative chapters and a concluding chapter which, based on 30 country studies (25 European, USA, Canada, Australia, Japan, Korea; reported in the companion volume Nolan et al. 2013), look at the evolution of inequalities, their social and political impacts, and national policies regarding inequality. Four chapters consider the evolution of inequalities of income and their drivers, the role of earnings and employment, the inequalities of wealth, and those of education. Four subsequent chapters address the social and political impacts in a wide range of fields, such as poverty and social exclusion, health and housing, attitudes towards inequality, trust, and political legitimacy. Next, policies of redistribution, job provision and public services are discussed in two chapters, followed by a chapter on educational policies and inequality. The chapter explains the approach and its challenges and ends with a summary overview of inequalities.
Yue Chim Richard Wong
- Published in print:
- 2017
- Published Online:
- January 2018
- ISBN:
- 9789888390625
- eISBN:
- 9789888390373
- Item type:
- chapter
- Publisher:
- Hong Kong University Press
- DOI:
- 10.5790/hongkong/9789888390625.003.0015
- Subject:
- Economics and Finance, Public and Welfare
“We are the 99%!” was the rallying cry of the short-lived Occupy Wall Street movement. It reflected concern about the finding that the share of total income enjoyed by the top 1% of earners has ...
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“We are the 99%!” was the rallying cry of the short-lived Occupy Wall Street movement. It reflected concern about the finding that the share of total income enjoyed by the top 1% of earners has increased since the 1970s, about a society seen as being divided between the very rich and the increasingly poor (at least in a relative sense), and about the wide, impassable gulf separating the two. The rise in income share of the top 1% can be explained to a large extent by the rise of superstars capable of earning vast sums in today’s globalized, digitized, networked, and financially integrated economy. That was not possible in the past. In addition, those in the English-speaking world seem to be better positioned than others to take advantage of this new environment.Less
“We are the 99%!” was the rallying cry of the short-lived Occupy Wall Street movement. It reflected concern about the finding that the share of total income enjoyed by the top 1% of earners has increased since the 1970s, about a society seen as being divided between the very rich and the increasingly poor (at least in a relative sense), and about the wide, impassable gulf separating the two. The rise in income share of the top 1% can be explained to a large extent by the rise of superstars capable of earning vast sums in today’s globalized, digitized, networked, and financially integrated economy. That was not possible in the past. In addition, those in the English-speaking world seem to be better positioned than others to take advantage of this new environment.
Sohail Choudhry
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9781447308713
- eISBN:
- 9781447312093
- Item type:
- chapter
- Publisher:
- Policy Press
- DOI:
- 10.1332/policypress/9781447308713.003.0006
- Subject:
- Sociology, Social Stratification, Inequality, and Mobility
This chapter begins with a discussion of the changing political discourse in Pakistan from the 1960s until today, concerning welfare that prioritized economic growth by way of creating infrastructure ...
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This chapter begins with a discussion of the changing political discourse in Pakistan from the 1960s until today, concerning welfare that prioritized economic growth by way of creating infrastructure and incentivizing an import substitution industry. Alongside a discussion of the economic causes and context of poverty and public policy, this chapter reviews the psycho-social dimensions of poverty and shame in the time period under question. Poverty in Pakistan has often been seen as a problem of inequality of income and ineffective redistribution. However, the chapter argues that poverty discourses are equally influenced by prevalent power structures which have mostly favoured policies which encourage dependence over those promoting individual agency. While these policies have generated short-term popular support, they have also worked adversely to affect the capacities of the people in the long-term and have thus reduced social mobility in Pakistan.Less
This chapter begins with a discussion of the changing political discourse in Pakistan from the 1960s until today, concerning welfare that prioritized economic growth by way of creating infrastructure and incentivizing an import substitution industry. Alongside a discussion of the economic causes and context of poverty and public policy, this chapter reviews the psycho-social dimensions of poverty and shame in the time period under question. Poverty in Pakistan has often been seen as a problem of inequality of income and ineffective redistribution. However, the chapter argues that poverty discourses are equally influenced by prevalent power structures which have mostly favoured policies which encourage dependence over those promoting individual agency. While these policies have generated short-term popular support, they have also worked adversely to affect the capacities of the people in the long-term and have thus reduced social mobility in Pakistan.
Karen Baehler and Douglas J. Besharov
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9780199990313
- eISBN:
- 9780199346363
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199990313.003.0001
- Subject:
- Social Work, Social Policy
The story of China’s spectacular economic growth is well known. Less well known is the country’s equally dramatic, though not always equally successful, social policy transition. Between the late ...
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The story of China’s spectacular economic growth is well known. Less well known is the country’s equally dramatic, though not always equally successful, social policy transition. Between the late 1990s and mid-2000s---the focal period for this book---China’s central government went a long way toward consolidating the social policy framework that had gradually emerged in piecemeal fashion during the initial phases of economic liberalization. Major policy decisions during the focal period included adopting a single national pension plan for urban areas, standardizing unemployment insurance, (re)establishing nationwide rural health care coverage, opening urban education systems to children of rural migrants, introducing trilingual education policies in ethnic minority regions, expanding college enrolment, addressing the challenge of HIV/AIDS more comprehensively, and equalizing social welfare spending across provinces, among others. Unresolved is the direction of policy in the face of longer-term industrial and demographic trends---and the possibility of a chronically weak global economy. Chinese Social Policy in a Time of Transition offers scholars, practitioners, students, and policymakers a foundation from which to explore those issues based on a composite snapshot of Chinese social policy at its point of greatest maturation prior to the 2007 global crisis.Less
The story of China’s spectacular economic growth is well known. Less well known is the country’s equally dramatic, though not always equally successful, social policy transition. Between the late 1990s and mid-2000s---the focal period for this book---China’s central government went a long way toward consolidating the social policy framework that had gradually emerged in piecemeal fashion during the initial phases of economic liberalization. Major policy decisions during the focal period included adopting a single national pension plan for urban areas, standardizing unemployment insurance, (re)establishing nationwide rural health care coverage, opening urban education systems to children of rural migrants, introducing trilingual education policies in ethnic minority regions, expanding college enrolment, addressing the challenge of HIV/AIDS more comprehensively, and equalizing social welfare spending across provinces, among others. Unresolved is the direction of policy in the face of longer-term industrial and demographic trends---and the possibility of a chronically weak global economy. Chinese Social Policy in a Time of Transition offers scholars, practitioners, students, and policymakers a foundation from which to explore those issues based on a composite snapshot of Chinese social policy at its point of greatest maturation prior to the 2007 global crisis.
