Compensation and Capital Income Inequality, Business Cycles, and Monetary Policy: United States, 1957-2016

2021 ◽  
Author(s):  
Nikolaos Charalampidis
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Income Inequality ◽  
Business Cycles ◽  
Capital Income

scholarly journals Growing Income Inequality in the United States and Other Advanced Economies

2020 ◽  
Vol 34 (4) ◽  
pp. 52-78
Author(s):  
Florian Hoffmann ◽  
David S. Lee ◽  
Thomas Lemieux
Keyword(s):  
United States ◽  
Income Inequality ◽  
The United States ◽  
Labor Income ◽  
Capital Income ◽  
Highly Educated ◽  
Labor Earnings ◽  
Income Ratio ◽  
European Economies ◽  
Education Groups

This paper studies the contribution of both labor and non-labor income in the growth in income inequality in the United States and large European economies. The paper first shows that the capital to labor income ratio disproportionately increased among high-earnings individuals, further contributing to the growth in overall income inequality. That said, the magnitude of this effect is modest, and the predominant driver of the growth in income inequality in recent decades is the growth in labor earnings inequality. Far more important than the distinction between total income and labor income, is the way in which educational factors account for the growth in US labor and capital income inequality. Growing income gaps among different education groups as well as composition effects linked to a growing fraction of highly educated workers have been driving these effects, with a noticeable role of occupational and locational factors for women. Findings for large European economies indicate that inequality has been growing fast in Germany, Italy, and the United Kingdom, though not in France. Capital income and education don’t play as much as a role in these countries as in the United States.

scholarly journals Changes in Business Cycles: Evidence and Explanations

1999 ◽  
Vol 13 (2) ◽  
pp. 23-44 ◽  
Author(s):  
Christina D Romer
Keyword(s):  
United States ◽  
Monetary Policy ◽  
World War Ii ◽  
World War I ◽  
Business Cycles ◽  
The United States ◽  
World War ◽  
Continuity And Change ◽  
Macroeconomic Indicators ◽  
Automatic Stabilizers

This paper shows that the volatility of annual real macroeconomic indicators for the United States and the average severity of recessions have declined only slightly between the pre-World War I and post-World War II eras. Recessions have, however, become somewhat less frequent and more uniform. It argues that the advent of macroeconomic policy after World War II can account for both the observed continuity and change. Countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions. At the same time, policy-induced booms and recessions have led to continued volatility of the postwar economy.

scholarly journals Homoploutia: Top Labor and Capital Incomes in the United States, 1950—2020

2020 ◽  
Author(s):  
Yonatan Berman ◽  
Branko Milanovic
Keyword(s):  
United States ◽  
World War Ii ◽  
Income Inequality ◽  
The United States ◽  
Labor Income ◽  
Capital Income ◽  
Total Income ◽  
Working Paper ◽  
Relevant Today ◽  
Income Ratio

Homoploutia describes the situation in which the same people (homo) are wealthy (ploutia) in the space of capital and labor income in some country. It can be quantified by the share of capital-income rich who are also labor-income rich. In this paper we combine several datasets covering different time periods to document the evolution of homoploutia in the United States from 1950 to 2020. We find that homoploutia was low after World War II, has increased by the early 1960s, and then decreased until the mid-1980s. Since 1985 it has been sharply increasing: In 1985, about 17% of adults in the top decile of capital-income earners were also in the top decile of labor-income earners. In 2018 this indicator was about 30%. This makes the traditional division to capitalists and laborers less relevant today. It makes periods characterized by high interpersonal inequality, high capital-income ratio and high capital share of income in the past fundamentally different from the current situation. High homoploutia has far-reaching implications for social mobility and equality of opportunity. We also study how homoploutia is related to total income inequality. We find that rising homoploutia accounts for about 20% of the increase in total income inequality in the United States since 1986. (Stone Center Working Paper Series)

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