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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:  Wealth and Income InequalityTESIS GRIS SOCIAL DETERMINANTS HEALTH

Chance favors the concentration of wealth UMNewsUniversity of Minnesota 612-624-5551, unews@umn.edu July 22, 2011 Chance pushes wealth into the hands of a few, a new University of Minnesota study shows. A new model predicts that chance pushes wealth into the hands of a few By Deane Morrison Most of the wealth in our society is invested in businesses or other ventures that may or may not pan out. Thus, chance plays a role in where the wealth of a society will end up. But does chance favor the concentration of wealth in the hands of a few, or does it tend to level the playing field? "Predictions from this model about how wealth is distributed were more accurate than predictions from classic economic models," says first author Joseph Fargione, an adjunct professor of ecology, evolution and behavior. Their results have implications for economic growth, the researchers say. How it works The model predicted that the rate at which wealth concentrates depends on the variation among individual return rates.

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

Europe’s Debt Crisis Has Become a German Identity Crisis “Germans, we don’t look to see what’s in our own national interest,” says Frank Schäffler. “We’re drunk with Europe.” Schäffler, a member of the Bundestag, Germany’s lower house of Parliament, is speaking on the phone from his home district of Bünde. The debt crisis in Europe has become a crisis of German identity. Schäffler is a member of the Free Democrats, a small party of what Americans would call libertarians, serving as the junior coalition partners to Angela Merkel’s much larger and more conservative Christian Democrats. Barely a year later, Greece is even closer to default, and Merkel is sending back a new treaty amendment that would replace the temporary “facility” with a permanent “mechanism”—a blueprint, in other words, for future bailouts. Among those who have lent their names to Schäffler’s pledge is Burkhard Hirsch, who represented the Free Democrats in the Bundestag over three decades, including four years as the body’s vice-president.

The Causes of Rising Income Inequality Changes in labor's share of income play no role in rising inequality of labor income: by one measure, labor's income share was almost the same in 2007 as in 1950. It's one of the biggest socioeconomic questions in America today: Why is income inequality rising in the United States, especially between the top 10 percent of workers and everybody else? In Controversies about the Rise of American Inequality: A Survey (NBER Working Paper No. 13982) , authors Robert J. Gordon and Ian Dew-Becker provide a comprehensive survey of seven aspects of rising inequality that are usually discussed separately: changes in labor's share of income; inequality at the bottom of the income distribution, including labor mobility; skill-biased technical change; inequality among high income groups; consumption inequality; geographical inequality; and international differences in the income distribution, particularly at the top. There is little evidence on the effects of imports. Why the disparity?

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.

Wall Street’s Euthanasia of Industry Michael interviewed on Guns N Butter with Bonnie FaulknerListen here “When I was in Norway one of the Norwegian politicians sat next to me at a dinner and said, “You know, there’s one good thing that President Obama has done that we never anticipated in Europe. He’s shown the Europeans that we can never depend upon America again. There’s no president, no matter how good he sounds, no matter what he promises, we’re never again going to believe the patter talk of an American President. Mr. Topics: The jobless recovery; the debt ceiling and default charade; China; Greece: banks, not countries, receive the bailouts; financial warfare; IMF and EU; European Central Bank; US credit default swaps; US agricultural exports create food dependency; currency devaluation devalues the price of labor; class war of banks against the rest of society. I’m Bonnie Faulkner. That’s why the stock market is down 160 points today. Somebody has to lose when loans go bad. This is happening throughout the world.

Annual income of richest 100 people enough to end global poverty four times over Downloads “We can no longer pretend that the creation of wealth for a few will inevitably benefit the many – too often the reverse is true.” Jeremy Hobbs Executive Director, Oxfam International Published: 19 January 2013 Leaders must aim to bring down global inequality at least to 1990 levels An explosion in extreme wealth and income is exacerbating inequality and hindering the world’s ability to tackle poverty, Oxfam warned today in a briefing published ahead of the World Economic Forum in Davos next week. The $240 billion net income in 2012 of the richest 100 billionaires would be enough to make extreme poverty history four times over, according Oxfam’s report ‘The cost of inequality: how wealth and income extremes hurt us all.’ The richest one per cent has increased its income by 60 per cent in the last 20 years with the financial crisis accelerating rather than slowing the process. New global deal needed Hobbs said: “We need a global new deal to reverse decades of increasing inequality.

Public Citizen Groups Public Citizen’s Congress Watch division champions consumer interests before the U.S. Congress and serves as a government watchdog. We engage in public education and advocacy, and are focused on the following: - Strengthening health, safety and financial protections. - Ensuring access to the courts to hold corporations accountable for wrongdoing. - Strengthening our democracy by exposing and combating the harmful impact of money in politics. Public Citizen’s Energy Program works to combat climate change by promoting safe, affordable and environmentally sustainable energy. Learn more about our work. The mission of Public Citizen’s Global Trade Watch is to ensure that in this era of globalization, a majority have the opportunity to enjoy America's promises: economic security, a clean environment, safe food, medicines and products, access to quality affordable services such as health care and the exercise of democratic decision-making about the matters that affect their lives.

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

Riad Marrakech, Location Riad Marrakech, Riads Marrakech, Riad Maroc Hotel Maroc Income inequality, the issue that won't go away The Rise and Consequences of Inequality in the United States Alan B. Krueger Chairman, Council of Economic Advisers January 12, 2012 Edited Remarks as Prepared for Delivery The topic I will address today is inequality. Although I have done much research in my career on inequality, I used to have an aversion to using the term inequality. But the rise in income dispersion – along so many dimensions – has gotten to be so high, that I now think that inequality is a more appropriate term. My theme in this talk is that the rise in inequality in the United States over the last three decades has reached the point that inequality in incomes is causing an unhealthy division in opportunities, and is a threat to our economic growth. President Obama summarized the rise of inequality very succinctly in his Osawatomie, Kansas speech, when he said, “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.” But we do not.

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.

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