Inequality

The Institute for New Economic Thinking takes a broad view of economic research and supports it in many ways: through its main grant program, through working groups it organizes, and via conferences, panels, and other smaller gatherings of scholars across the globe.

Institute scholars normally publish their work in journals and books. While many – but far from all – of this work appears in working papers sponsored by the Institute and other leading research forums, the Institute also attempts to make its research results accessible to a wider public on its website. Below is a sampling of interviews featuring Institute scholars explaining the significance of their research in non-technical terms.

Between Free and Forced Labor: An innovative new paper by INET grantee Suresh Naidu

Economists differentiate free and forced labor as if there were no room in between. Yet history shows many examples of "intermediate" labor market institutions that fall outside this simple dichotomy. These historical labor markets have rarely looked like the textbook free markets.  Read more

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.

Economic Inequality and Sustainable Transportation Policy

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This project will examine how the spatial pattern of inequality in U.S. cities shapes the provision of public transit and – more broadly – the prospects for a more equitable and sustainable transportation policy. This mixed-methods project uses Census data for 1970-2007 linked to a national transit database, as well as documentary information on public debates over transit, and asks: (1) does the return of affluent residents to central cities promote investment in transit? (2) does economic segregation exclude low-income residents from the benefits of these new investments? and (3) does co-location of affluent and low-income residents lead to cross-class coalitions for transit?

The Measurement and Assessment of Inequalities on a World Scale

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This project will extend the work of the University of Texas Inequality Project, permitting new data development and research in two technical and at least three substantive areas. The technical projects are: (1) updating the core global inequality data-sets from 2000 through the Great Financial Crisis; (2) GIS mapping of changing inequalities using global and national data.  The substantive projects include: (1) assessment of the effects of financial crisis on inequality;  (2)  inequality and demographic factors, including health, life expectancy and fertility; and (3) a comparative assessment of social, political and financial factors that reduce and increase inequality.

Innovation Systems: Positive and Normative Perspectives

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This project will study the innovation system both from a positive and a normative perspective. From a positive perspective it will investigate what the consequences and the drivers are of the striking differences in the cross-sectoral patterns of investment in R&D that exist between the U.S. and Germany. In particular, it will explore how they may affect job creation, the trade balance, and inequality. From a normative perspective, the project will explore the economic foundations of public R&D organizations. Read more

Azim Premji Summer School

Azim Premji University and the Institute for New Economic Thinking ran their first Advanced Graduate Workshop in Indian Development from July 9-15, 2012. The workshop was open to advanced Ph.D. social science students in any Indian university and explored critical debates in Indian economic development. The workshop was devoted to identifying the complex interactions that have influenced India’s trajectory of development and to conceive of development strategies that might be successful in promoting equitable growth, building workforce capabilities, and reducing poverty. Read more