Piketty and thinking about economics

There is a new economics rock-star touring the US by all accounts, and his name is Thomas Piketty. More precisely, the star of the show is Picketty's Capital in the Twenty-First century which is a 700-page volume on wealth distribution in 30 countries over decades and centuries of data. Read more

Inequalities by Race and Gender in the Earnings of Women of Color

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This project examines inequalities by gender and race in the earnings of women of color.  It investigates how gender and race affect the earnings of African American, Latina, and Asian American women in the United States over five decades, from 1970 to 2010.  Using decennial census data, the study seeks to measure the separate and intersectional effects of gender and race and the causes of these—whether from discrimination, differences in worker characteristics, or segregation in different jobs.  It will address policies that can reduce these inequalities, and it will offer a comparative analysis among these women to examine patterns in these inequities, the causes of them, and remedies to reduce them.  

The Myth of Maximizing Shareholder Value

In 2010, the 500 largest companies in the United States, otherwise known as The Fortune 500, generated $10.7 trillion in sales, reaped a whopping $702 billion in profits, and employed 24.9 million people around the world.

Historically this has been good news. After all, when these corporations have invested in the productive capabilities of their U.S. employees, Americans have typically enjoyed plentiful well paying and stable jobs. That was the case a half century ago.

Unfortunately, as Bill Lazonick points out in the interview below, it’s not the case today. Read more

Inequality in China - INET Hong Kong

Breakout panel on "Inequality in China" at the Institute for New Economic Thinking's "Changing of the Guard?" conference in Hong Kong. Featured panelists Albert Park, Scott Rozelle, Dali Yang, Junsen Zhang, and INET Grantee Steven Durlauf.

Statistical Physics Approach to Income and Wealth Distribution

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This project deals with income and wealth inequality, financial instability, and the distribution of energy consumption around the world.  It is guided by ideas from statistical physics, such as spontaneous development of wide distributions in an ensemble of initially equal agents.  Maximization of entropy in partitioning of a limited resource among many agents leads to the wide exponential distributions, often confirmed by empirical data.  The research will focus on mathematical modeling of the two-class structure of income distribution (1% vs. 99%) and the effect of growing inequality on dynamics of money flow in the system.

Income Inequality, Household Debt, and Current Account Imbalances

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There is growing concern among economists that rising income inequality can contribute to the generation of financial crises and to macroeconomic instability more generally. In particular, it has been argued that rising inequality has contributed not only to the increase in household debt and the current account deficit in the United States but also to the overly export-dependent growth models of countries like China and Germany. This project will analyze the country-specific effects of inequality within a stock-flow consistent (SFC) macro model and within a DSGE model with heterogeneous and interacting households. The calibration of the model will be guided by an in-depth analysis of household and company survey data and national institutions. Read more

Does Financialization Contribute to Growing Income Inequality?

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The financialization of the US economy and rising income inequalities are two of the most profound economic developments of the last fifty years. In this project we ask if the financialization of the US economy has contributed to rising income inequality.  We propose to answer this question with complementary analyses at the individual, firm and industry levels.  We focus on three components of the earnings distribution: employment earnings distributions, executive compensation, and capital/labor shares of value added. For firms we also examine the consequences of financialization for global and domestic employment and for domestic employment separately for various occupational groups.

Rising Inequality as a Structural Cause of the Financial and Economic Crisis

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The financial crisis that began in summer 2007 has turned into the worst economic crisis since the Great Depression. Its causes are usually sought in the malfunctioning of the financial sector. Non-financial factors often receive less attention. One of the major socio-economic changes of recent decades has been a dramatic shift in income distribution. The project investigates whether rising inequality has contributed to the macroeconomic imbalances that erupted in the present crisis. This is done based on a Kaleckian macroeconomic model. This project suggests that the present crisis should be understood as an outcome of the interaction of the process of financial deregulation with the effects of the polarization of income distribution. Read more

The Significance of Inequality

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Economics and political philosophy are both concerned with questions of distributive justice, and both disciplines have made significant breakthroughs in understanding problems of inequality. Nevertheless, each discipline pays scant attention to the insights of the other. This project will show what economists can learn from political philosophers in thinking about economic inequality while also investigating the philosophical significance of recent empirical work on inequality, within economics and elsewhere. Each discipline can be significantly enriched by the insights of the other in understanding the significance of inequality.