Payroll taxation increases inequality at the top

In recent decades, inequality of household income has increased globally. A common trend is increased income inequality at the top of the distribution. The sources of this trend are a matter of debate. Increased demand for analytical and managerial skills is said to have strongly increased labor incomes at the top. Other scholars have indicated that structural conditions, such as financialization or favorable taxation, have benefited top-earning households. Here, we contribute to the latter line of reasoning. We show that payroll taxation reinforces income inequality at the top. Such taxation has large fiscal volume and redistributive power. However, our knowledge about the distributional consequences of payroll taxation as a tax scheme is remarkably thin. We claim that payroll taxes are central to understanding income inequality. Many countries, such as Germany and the US, restrict payroll taxes to a maximum amount, resulting in significant payroll tax-exempted incomes for high-earning households. Strongly growing top-labor incomes thus lead to increased payroll tax-exempted incomes for households at the upper parts of the distribution and, consequently, to higher income dispersion. We use Germany (1992–2017), a highly redistributive country, as a case study. Our empirical results suggest that: a) households increasingly profit from payroll-exempted labor incomes across the upper quarter; b) this benefit has increased over time; and c) increased amounts of payroll tax-exempted labor income explain up to 60% of income dispersion at the top of the distribution. We discuss the generalizability of our case study for other countries.

Effects of Income Distribution Changes on Assortment Size in the Mainstream Grocery Channel

The authors study the effect of changes in the United States income distribution on assortment size in the mainstream grocery channel. Census demographics for 1,711 counties are matched to local assortment data from Nielsen in 944 grocery product categories from 2007 to 2013. The authors show that holding other demographics constant, assortment size increases with higher average income but decreases with greater income dispersion. This pattern holds for several specifications of assortments at the local level: the number of category Universal Product Codes (UPCs), number of brands, number of products per brand, and horizontal and vertical dimensions of assortments. The results suggest that increased income dispersion (holding other factors constant) reduces both horizontal and vertical differentiation. The effect sizes are similar for private labels and branded products, but large brands lose proportionally more UPCs than small brands when income dispersion rises. Potential mechanisms underlying the results are also explored, with evidence that a hollowing out of the middle class along with Engel’s law of expenditure explain a significant portion of this effect. The findings also offer insights for consumer packaged goods manufacturers that might help them allocate resources to expand shelf presence or defend current positions. This paper was accepted by Matthew Shum, marketing.

The Convergence-Divergence Evaluation of the Countries Development under the Globalization

The article considers the problem of uneven economic development in terms of processes of globalization and integration. The problem is analyzed retrospectively to estimate simultaneous convergent-divergent processes, which are characterized by the intensification of trade, investment and information flows, on the one hand, and their concentration in the hands of the powerful post-industrial countries, on the other. This causes the need for scientific evidence of uneven economic development of the global economy, what became an urgent issue of international economy. The article aims to evaluate the coefficient of variation, which was counted on the gross national income per capita, and conduct the cluster analysis. It was proven the divergence of the countries and rejected the s-convergence hypothesis, according to which the income dispersion between countries increased during the analyzed period. The cluster analysis shows the intensification of the the global inequality of the economic and social development, stratification, polarization and disproportions of the global economy. Article amplifies that the intensification of the globalization processes with its difficulties, nonlinearity and ambivalence leaded to the technological and social differentiation, in consequence of what many countries remain behind the developed ones. It is emphasized that convergent-divergent processes of the national economic development are expanding what leaded to the idea of the deglobalization. The findings are used to determine the current situation on the global economic arena and answer the question why some countries are rich and others are poor. It considers that the realization of the neoliberal model of the globalization is not effective and is accompanied together with the different destabilization tendencies. In this case institutional approach to the governmental organization of the globalization processes takes on special significance in aim to decrease the gap between rich and poor countries and to overcome present crisis.

Intergenerational Mobility and Unequal School Opportunity

We analyse the impact of unequal school opportunity on intergenerational income mobility and human capital accumulation. Building upon the classical Becker–Tomes–Solon framework, we use a regime-switch model allowing for differences in income transmission across groups. We find that unequal school opportunity raises average human capital because of assortative matching. However, because income dispersion tends to be higher at the top, in most cases unequal school opportunity decreases intergenerational mobility. Calibrating the model to the USA, simulations suggest that school equalisation and desegregation policies have positive effects on mobility at relatively small efficiency costs.

Commitment in Organizations and the Competition for Talent

We show that a change in organizational structure from partnerships to public companies—which weakens contractual commitment—can lead to higher investment in high return-and-risk activities, higher productivity (value added per employee) and greater income dispersion (inequality). These predictions are consistent with the observed evolution of the financial sector where the switch from partnerships to public companies has been especially important in the decades that preceded the 21st Century financial crisis.

Opposing Effects of Economic Inequality Concentrated at the Top or Bottom of the Income Distribution on Subjective Well-Being

Prior studies commonly conceptualize economic inequality as income dispersion, predominantly operationalize it through the Gini coefficient—and find inconsistent results for the relationship to subjective well-being. We draw on prior research highlighting that two income distributions can have the same Gini coefficient but differ in where inequality is concentrated, and suggest that bottom-concentrated economic inequality (i.e., the ratio of the 50th to the 10th income percentile) and top-concentrated economic inequality (i.e., the ratio of the 95th to the 50th income percentile) have opposing effects on subjective well-being. We provide empirical support using zip-code level income ratios extracted from the American Community Survey matched to individual-level subjective well-being from the Gallup U.S. Poll (N = 573,025), which also reveals that these opposing effects are stronger for higher- than lower-income individuals. Where inequality is concentrated is thus crucial to understanding how economic inequality predicts subjective well-being and other outcomes of societal importance.

Institutional bases of household income dispersion in Poland and in France. A retrospective analysis

Household income dispersion in Poland is growing systematically. Since the late 1970s, the Gini index has increased from 0.252 (1975) to 0.313 (2016). At the same time in France, the ratio has dropped from 0.34 (late 1970s) to 0.293 (2016). A higher income dispersion is also observed among various occupations and across genders. The ratio of minimum to average wages has increased from 33.7% (1975) to 45.45% (2019). The research period covers the period of the centrally planned economy in Poland, when income leveling was an effect of government policy, and that of the market economy, which caused significant income disparities. The research problem is the growing household income dispersion in Poland. The aim of the study was to determine the institutional sources of increasing income dispersion. The study involved a comparative analysis of income dispersion in the years 1975–2017 in the context of institutional changes taking place in these countries, especially after 1990. The author applied a hypothetico-deductive method. Having analysed income dispersion, the author made a hypothesis regarding the influence of institutional changes on this phenomenon and presented the groups of institutional factors. The conducted research indicated inequalities in Poland grew mainly as a result of high dynamics in the income of the highest earners (top 10% and 1%). The social policy of the Polish government may have had little impact on this factor. Moreover, the distributional effects of taxes and transfers were slightly weaker in Poland than in France. An increase in the scale of acceptance of the inequality level in Poland over the past few years is noteworthy. In France, the public opposition to inequality is growing, even though income inequality is lower than in many European countries.

An Empirical Investigation of the income share of the middle class

The scientific evaluation of the relationship between growth, redistribution, and the income share of the middle class is still in its infancy. This article aims to investigate how the drivers of economic growth impinge on market income distribution and how the middle class has a role in deciding the level of redistribution. Our strategy is to dodge the reverse causality problem, stemming from the bi-directional relation between income distribution and growth, by exploiting the peculiar feature of different indicators of income dispersion focused on the middle income group. The findings reveal that market forces and redistributive policies are both pivotal in shaping the evolution of income dispersion and in particular the income share of the middle class, over the growth process. The ability of redistributive policies to counteract the ongoing increase in income inequality seems to depend not only on the political pressure exerted by an impoverishing median voter but also on the expansion of fiscal revenues after sustained Gross Domestic Product (GDP) growth.

The Contribution of National Income Inequality to Regional Economic Divergence

After more than a century of convergence, the economic fortunes of rich and poor regions of the United States have diverged dramatically over the last 40 years. Roughly a third of the US population now lives in metropolitan areas that are substantially richer or poorer than the nation as a whole, almost three times the proportion that did in 1980. In this paper I use counterfactual simulations based on Census microdata to understand the dynamics of regional divergence. I first show that regional divergence has primarily resulted from the richest people and places pulling away from the rest of the country. I then estimate the relative contributions to regional divergence of two major socioeconomic trends of recent decades: the sorting of people across metro areas by income level and the national rise in income inequality. I show that the national rise in income inequality is sufficient on its own to account for more than half of the observed divergence across regions, while income sorting on its own accounts for less than a quarter. The major driver of regional economic divergence is national-level income dispersion that has exacerbated preexisting spatial inequalities.

Eu Policy Appraisals and Public Opinion: A Tale of Sophistication and Interdependence?

Although the literature about European Union (EU) public opinion is quite extensive, much of it focuses on general indexes of support for the EU or one specific EU policy area. The study of citizens’ appraisal of the EU contribution across socioeconomic policies and its interdependence is uncharted territory. The present article addresses this gap in the research. Using Eurobarometer data, it is demonstrated that national publics tend to be dissatisfied with the EU contribution across policies and that this assessment is consistent and interrelated from one policy to another. Education is found to have only a relatively modest impact on this assessment while the degree of an EU member state’s integration in the world economy is not found to sway the latter. The findings finally show that national levels of unemployment, immigration, income dispersion, and the positioning of party leaderships on social redistribution influence public opinion on EU policy input. In the light of these findings, implications are drawn.