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On Fri, 14 Apr 2000, Patrick L. Mason wrote:
> The distribution of income has become more unequal in the US over the last
> generation or so. To what extent is this true for other OECD countries?
> Developing countries?
>
> What are the causes of increasing inequality?
>
>
> peace, patrick l mason
Hi Patrick, very good question. It is my impression that the distribution
of income has also become more unequal in most other advanced countries
and also in developing countries in recent decades. Nancy Birdsall's
data, presented at a recent conference at Mount Holyoke College in which
you also participated, showed this trend of increasing inequality for most
countries in both categories (remember?).
This trend of increasing inequality is contrary to the famous Kuznets
curve (an inverted U), in which an ugly initial phase of increasing
inequality (and all the attendant horrors of early capitalism), is
supposed to followed by greater equality.
As I remember (I have not yet been able to check this), the distribution
of income in the US became more unequal from the early 19th century to the
early 20th century. Then the Great Depression seems to have reduced
income inequality, as the upper incomes appear to have lost relatively
more than the lower incomes. After World II, the distribution of income
remained more or less stable until the early 1980's. Since then, of
course the distribution of income has become more unequal. Therefore, the
Kuznets curve for the US does not look much like an inverted U. After a
long period of increase, inequality declined for a brief period, then
leveled off, and then began to rise again?
The main explanation presented by mainstream economists (including
Birdsall at the conference and a recent book by Peter Gottschalk entitled
*America Unequal*) of this recent trend of increasing inequality focuses
almost entirely on labor income. The main cause of increasing inequality
of wage and salary income is supposed to be an increasing gap between
skilled and unskilled labor, or an increasing gap in "human capital",
especially education and computer literacy.
But in most countries, labor income as a percentage of total income has
been declining in recent years. And the distribution of property (stocks,
bonds, land, etc.) has also becoming more unequal. Therefore, it would
seem these two trends (increasing percentage of property income and
increasing concentration of property) were also important causes of the
increasing income inequality.
Patrick, what is your own answer to your question? What do you think are
the main causes of the trend toward greater income inequality? I would be
very interested in your answers, or at least your hypotheses.
Comradely,
Fred
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