D31: Personal Income, Wealth, and Their Distributions

Top Earners: Cross-Country Facts

Alejandro Badel, Moira Daly, Mark Huggett, Martin Nybom

We provide a common set of life-cycle earnings statistics based on administrative data from the United States, Canada, Denmark and Sweden. We find three qualitative patterns, which are common across countries. First, top-earnings inequality increases over the working lifetime. Second, the extreme right tail of the earnings distribution becomes thicker with age over the working lifetime. Third, top lifetime earners exhibit dramatically higher earnings growth over their working lifetime.

Belief in Hard Work and Altruism: Evidence from a Randomized Field Experiment

Sule Alan, Seda Ertac

We show that optimistic beliefs regarding the role of effort in success, while leading to success, diminish the individual’s sympathy toward the unsuccessful. We generate random variation in the degree of optimism about the productivity of effort via an effective educational intervention. We find that treated children, holding significantly more optimistic beliefs, are no less likely than control to give to unlucky recipients, but significantly less likely to give to those who failed at a real effort task despite an opportunity to build skill.

The Merit Primacy Effect

Alexander Cappelen, Karl Ove Moene, Siv-Elisabeth Skjelbred, Bertil Tungodden

Do people give primacy to merit when luck partly determines earnings? This paper reports from a novel experiment where third-party spectators have to decide whether to redistribute from a high-earner to a low-earner in cases where earnings are determined by luck and merit. Our main finding is that the spectators assign strong primacy to merit in such situations, and as a result violate basic fairness conditions.

Cutthroat capitalism versus cuddly socialism: Are Americans more meritocratic and efficiency-seeking than Scandinavians?

Ingvild Almås, Alexander Cappelen, Bertil Tungodden

There is a striking difference in income inequality and redistributive policies between the United States and Scandinavia. To study whether there is a corresponding cross-country difference in social preferences, we conducted the first large-scale international social preference experiment, with nationally representative samples from the United States and Norway. We introduce a new experimental approach, which combines the infrastructure of an international online market place and the infrastructure of a leading international data collection agency.

Intergenerational Mobility and Preferences for Redistribution

Alberto Alesina, Stefanie Stantcheva, Edoardo Teso

Using newly collected cross-country survey and experimental data, we investigate how beliefs about intergenerational mobility affect preferences for redistribution in five countries: France, Italy, Sweden, U.K., and U.S. Americans are more optimistic than Europeans about intergenerational mobility, and too optimistic relative to actual mobility. Our randomized treatment that shows respondents pessimistic information about mobility increases support for redistribution, mostly for equality of opportunity policies.

Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework

Manuel Arellano, Richard Blundell , Stéphane Bonhomme

We develop a new quantile-based panel data framework to study the nature of income persistence and the transmission of income shocks to consumption. Log-earnings are the sum of a general Markovian persistent component and a transitory innovation. The persistence of past shocks to earnings is allowed to vary according to the size and sign of the current shock. Consumption is modeled as an age-dependent nonlinear function of assets, unobservable tastes and the two earnings components.

Capabilities and Skills

Chase O. Corbin, James J. Heckman

This paper discusses the relevance of recent research on the economics of human development to the work of the Human Development and Capability Association. The recent economics of human development brings insights about the dynamics of skill accumulation to the literature on capabilities. Skills embodied in agents empower people. Enhanced skills enhance opportunities and hence promote capabilities. We address measurement problems common to both the economics of human development and the capability approach.

Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades

Jeremy Lise, Nao Sudo, Michio Suzuki, Ken Yamada, Tomoaki Yamada

In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption.

Income Inequality, Equality of Opportunity, and Intergenerational Mobility

Miles Corak

My focus is on the degree to which increasing inequality in the high-income countries, particularly in the United States, is likely to limit economic mobility for the next generation of young adults. Both cross-country comparisons and the underlying trends suggest that the underlying drivers of intergenerational mobility are all configured most likely to lower, or at least not raise, the degree of mobility for the next generation of Americans coming of age in a more polarized labor market.

Intrahousehold Distribution and Child Poverty: Theory and Evidence from Côte d'Ivoire

Olivier Bargain, Olivier Donni, Prudence Kwenda

Poverty measures in developing countries often ignore the distribution of resources within families and the gains from joint consumption. In this paper, we extend the collective model of household consumption to recover mother's, father's and children's shares together with economies of scale, using the observation of adult-specific goods and an extended version of the Rothbarth method.