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Finance & Development, September 2011 - Equality and Efficiency

Finance & Development, September 2011 - Equality and Efficiency
Finance & Development, September 2011, Vol. 48, No. 3 Andrew G. Berg and Jonathan D. Ostry PDF version Is there a trade-off between the two or do they go hand in hand? IN his influential 1975 book Equality and Efficiency: The Big Tradeoff, Arthur Okun argued that pursuing equality can reduce efficiency (the total output produced with given resources). Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? In a word, no. In recent work (Berg, Ostry, and Zettelmeyer, 2011; and Berg and Ostry, 2011), we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. Inequality matters for growth and other macroeconomic outcomes, in all corners of the globe. How do economies grow? The experiences in developing and emerging economies, however, are far more varied (see Chart 2). Income distribution and growth sustainability Hazard to sustained growth Cameroon is typical. Related:  TESIS GRIS SOCIAL DETERMINANTS HEALTH

Paying Nothing, Conservative Style By Matthew Yglesias on October 11, 2011 at 4:44 pm "Paying Nothing, Conservative Style" Here’s Matt Labash and the Weekly Standard trying to mislead you about taxation and the income distribution: You’re either part of “us,” the “99 percent” (as all the surrounding signage identifies us), or you’re part of “them” — the rapacious 1 percent, who are purportedly strangling our nation by holding roughly one-third of its wealth, even if they also pay 38 percent of all federal income taxes while the bottom 47 percent of the population pay nothing (a Revolution is no place for facts and figures). You might as well say that the 20 percent of Americans who smoke cigarettes regularly pay 95 percent of federal tobacco excise taxes while 70 percent of the population pays nothing. The genius of the conservative rhetorical move here is that most people think of the taxes that you pay when you “do your taxes” in April as being your income taxes.

Finance & Development, December 2010 - Leveraging Inequality Finance & Development, December 2010, Vol. 47, No. 4 Michael Kumhof and Romain Rancière PDF version Long periods of unequal incomes spur borrowing from the rich, increasing the risk of major economic crises THE United States experienced two major economic crises over the past 100 years—the Great Depression of 1929 and the Great Recession of 2007. Are these two facts connected? Shifting wealth We looked at the evolution of the share of total income controlled by the top 5 percent of U.S. households (ranked by income) compared with ratios of household debt to income in the periods preceding 1929 and 2007 (see Chart 1). In the more recent period (1983–2007), the difference between the consumption of the rich and that of the poor and middle class did not widen as much as the differences in incomes of these two groups. In other words, the increase in the ratios of debt to income shown in Chart 1 was concentrated among poor and middle-class households. Modeling the facts Policy options References

INFORMATION CLEARING HOUSE. NEWS, COMMENTARY & INSIGHT Finance & Development, September 2011 - Unequal = Indebted Finance & Development, September 2011, Vol. 48, No. 3 Michael Kumhof and Romain Rancière PDF version Higher income inequality in developed countries is associated with higher domestic and foreign indebtedness ECONOMISTS have long worried about the growing chasm between countries that borrow heavily internationally and those that dish out the loans. But there is another, domestic dimension to the pileup of international obligations. Why the United States has built such persistent and large deficits in its current account—which covers all noninvestment international transactions, including exports and imports, dividends and interest, and remittancese—is a matter of some debate. In current research we therefore extend the work reported in “Leveraging Inequality” (F&D, December 2010), which dealt with only the United States, to include an open-economy dimension. Modeling the facts An economic model can clearly illustrate these links between income inequality and current account deficits.

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Free exchange: All men are created unequal INEQUALITY is one of the most controversial attributes of capitalism. Early in the industrial revolution stagnant wages and concentrated wealth led David Ricardo and Karl Marx to question capitalism’s sustainability. Twentieth-century economists lost interest in distributional issues amid the “Great Compression” that followed the second world war. But a modern surge in inequality has new economists wondering, as Marx and Ricardo did, which forces may be stopping the fruits of capitalism from being more widely distributed. “Capital in the Twenty-First Century” by Thomas Piketty, an economist at the Paris School of Economics, is an authoritative guide to the question. The book suggests that some 20th-century conventional wisdom was badly wrong. The centrepiece of Mr Piketty’s analysis is the ratio of an economy’s capital (or equivalently, its wealth) to its annual output. Pre-1914 economies were very unequal. Victorian values

National Institute on Money in State Politics The Institute's Blog: Nonpartisan. Timely. Transparent. The Sun Never Rises: Sources of Michigan’s Dark Money Set to Remain HiddenTwo days after Christmas, Governor Rick Snyder gave a belated gift to dark money groups and those donors who felt stifled by Michigan’s campaign finance limits. Thanks for your Support We're thankful for new general support from The William and Flora Hewlett Foundation for the Institute's work to invigorate debate about the role money plays in elections and policy decisions with data-backed evidence. Watch for Updates! We now offer RSS (Really Simple Syndication) feeds of our data that enable you to stay up-to-date on our data, track new reports, and see new contributions to candidates, parties, ballot measures, committees and states.

Desigualdad, ¿El problema social de los próximos años? - Econstuff | Econstuff Durante los últimos días la econosfera ha puesto el foco en la desigualdad, un tema de creciente interés tanto por su relación con la actividad económica como por el problema social que representa, en un momento en el que parece que dejamos una crisis económica atrás mientras la crisis social permanece como una parte cada vez más relevante de la nueva realidad que se está gestando. Ya en la reunión que tuvo Janet Yellen con los senadores, un tema recurrente por parte de estos fue preguntarle sobre la desigualdad y lo que se podía hacer para solucionar un problema que a veces no se remedia únicamente con aumentos continuados del PIB. Janet Yellen (1): This is a very serious problem, it’s not a new problem, it’s a problem that really goes back to the 1980s, in which we have seen a huge rise in income inequality En el anterior gráfico podemos ver la evolución de dos ratios para el caso Español. Fuente: Inequality from generation to generation: the United States in Comparison Real Liberal Politics Human Development Reports | United Nations Development Programme Dissent Magazine IMF: Income inequality is terrible for economic growth As the Occupy Wall Street protests swell in size and people pay closer attention to the gap between the wealthiest Americans and everyone else, one question is why this divide even matters. One way to look at income inequality, after all, is that it’s no big deal. If a country is growing at a healthy clip and everyone is steadily getting richer, then it’s hardly an outrage that a few titans at the very top are doing freakishly well, right? But a recent study from the International Monetary Fund suggests that this conventional view is misguided. In the IMF’s Finance & Development magazine, the authors, Andrew Berg and Jonathan Ostry, summarize their recent research (see also Josh Harkinson’s piece for Mother Jones). For sustained growth to occur, Berg and Ostry found, the most important factors are a relatively equal income distribution and trade openness. Why would inequality be so crushing for a country’s economy? Do these lessons apply to the United States?

Is Regulatory Uncertainty a Major Impediment to Job Growth? By: Dr. Jan Eberly Last week at a Senate hearing Secretary Geithner said, “I'm very sympathetic to the argument you want to be careful to get the rules better and smarter, but I don’t think there's good evidence in support of the proposition that it's regulatory burden or uncertainty that's causing the economy to grow more slowly than any of us would like.” Economists from across the political spectrum have also weighed into this debate and reached the same conclusion. Nonetheless, two commonly repeated misconceptions are that uncertainty created by proposed regulations is holding back business investment and hiring and that the overall burden of existing regulations is so high that firms have reduced their hiring. Business Profits If regulation was a significant drag on business today, we would expect to see profits constrained after recent regulatory reforms were passed into law. Trends in Workforce, Capacity Utilization, and Business Investment Financial Indicators A Sensible Path Forward