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Session Overview
Session
B02: Inequality
Time:
Wednesday, 18/Aug/2021:
12:30pm - 2:00pm


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Presentations
12:30pm - 12:52pm

Wealth and its Distribution in Germany, 1895-2018

Charlotte Bartels1, Thilo Albers2, Moritz Schularick3

1German Institute for Economic Research (DIW), Germany; 2Humboldt University, Germany; 3University of Bonn, Germany

This paper presents the first comprehensive study of the long-run evolution of wealth inequality in Germany combining tax data, surveys, national accounts and rich lists. We show that the concentration of wealth in the hands of the top 1% has fallen by half, from close to 50% in 1895 to less than 25% today. Since unification, two off-setting trends have shaped the German wealth distribution. Households at the top made substantial capital gains from rising equity valuations that were counterbalanced by large middle-class capital gains from rising house prices and high middle class savings. However, these asset price induced gains in business and housing wealth almost entirely by-passed households in the bottom half of the wealth distribution so that the wealth gap between the bottom and the upper half has widened significantly. Finally, we also show that official statistics underestimate privately held German business wealth and real estate wealth.

Bartels-Wealth and its Distribution in Germany, 1895-2018-383.pdf


12:52pm - 1:15pm

A Safe Harbor: Wealth-Income Ratios in Switzerland over the 20th Century and the Role of Housing Prices

Enea Baselgia1, Isabel Z. Martinez2

1University of St.Gallen, Switzerland; 2ETH Zurich, Switzerland

We estimate the ratio of private wealth to national income, βpt, for Switzerland over the period 1900–2018. Our results indicate that the development of βpt in Switzerland did not follow a U-shaped pattern as in most European countries, but that the evolution was extraordinarily stable, with βpt oscillating around 500% over most of the 20th century. How- ever, the wealth-income ratio has been on the rise since the turn of the century to reach 721% in 2017—an unprecedented level in the past. This considerable increase is mainly driven by large capital gains in housing wealth since 2010. We present new cross-country evidence that capital gains in housing wealth have become an important driver of rising wealth-income ratios in a series of developed economies.

Baselgia-A Safe Harbor-469.pdf


1:15pm - 1:37pm

Redistribution of Return Inequality

Karl Schulz

University of Mannheim, Germany

The rich obtain higher returns than the poor. How should the tax system account for this return inequality? I study capital taxation in an economy in which returns correlate with ability and wealth, giving rise to type and scale dependence. Whereas an increase in type dependence raises optimal capital taxes, more scale dependence provides a rationale for lower tax rates, making the policy implications of return inequality non-trivial. Aside from amplifying capital inequality, scale dependence generates an inequality multiplier effect between wealth and its returns, raising standard capital elasticity measures. At an aggregate level, a rise in redistribution induces a compression effect on the distribution of pre-tax returns. In a financial market microfoundation, I identify general equilibrium trickle-up externalities that call for more redistribution relative to the partial equilibrium. Finally, I provide macro and micro estimates of the novel sufficient statistics and demonstrate their quantitative importance.

Schulz-Redistribution of Return Inequality-159.pdf


1:37pm - 2:00pm

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

Yonatan Berman1,2, Branko Milanovic2,3

1London Mathematical Laboratory; 2Stone Center on Socio-Economic Inequality, The Graduate Center, CUNY; 3International Inequalities Institute, London School of Economics

Homoploutia describes the situation in which the same people have both high capital and labor income in some country. It can be quantified by the share of capital-income rich who are also labor-income rich. 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. We also find that rising homoploutia accounts for about 20% of the increase in total income inequality in the United States since 1986.

Berman-Homoploutia-128.pdf


 
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