"Conclusions
The rise in top income shares in the United States has been dramatic. In seeking
explanations, however, it would be misleading to focus just on the doubling of the
share of income going to the top 1 percent of the US distribution over the past
40 years. We also have to account for the fact that a number of high-income countries
have seen more modest or little increase in top shares. Hence, the explanation
cannot rely solely on forces common to advanced countries, like the impact of new
technologies and globalization on the supply and demand for skills. Moreover, the
explanations have to accommodate the falls in top income shares earlier in the twentieth
century that characterize the countries discussed here.
In this paper, we have highlighted four main factors that have contributed to
the growing income shares at the very top of the income distribution, noting that
they may operate to differing extents in the United States and other countries,
particularly in continental Europe. The fist is tax policy: top tax rates have moved in
the opposite direction from top pre-tax income shares. The second factor is a richer
view of the labor market, where we have contrasted the standard supply-side model
with the alternative possibility that there may have been changes to bargaining
power and greater individualization of pay. Tax cuts may have led managerial energies
to be diverted to increasing their remuneration at the expense of enterprise
growth and employment. The third factor is capital income. In Europe?but less
so in the United States?private wealth (relative to national income) has followed a
spectacular U-shaped path over time, and inherited wealth may be making a return,
implying that inheritance and capital income taxation will become again central
policy tools for curbing inequality. The final, little-investigated, element is the
correlation between earned income and capital income, which have become more
closely associated in the United States."
The Top 1 Percent in International and Historical Perspective
The rise in top income shares in the United States has been dramatic. In seeking
explanations, however, it would be misleading to focus just on the doubling of the
share of income going to the top 1 percent of the US distribution over the past
40 years. We also have to account for the fact that a number of high-income countries
have seen more modest or little increase in top shares. Hence, the explanation
cannot rely solely on forces common to advanced countries, like the impact of new
technologies and globalization on the supply and demand for skills. Moreover, the
explanations have to accommodate the falls in top income shares earlier in the twentieth
century that characterize the countries discussed here.
In this paper, we have highlighted four main factors that have contributed to
the growing income shares at the very top of the income distribution, noting that
they may operate to differing extents in the United States and other countries,
particularly in continental Europe. The fist is tax policy: top tax rates have moved in
the opposite direction from top pre-tax income shares. The second factor is a richer
view of the labor market, where we have contrasted the standard supply-side model
with the alternative possibility that there may have been changes to bargaining
power and greater individualization of pay. Tax cuts may have led managerial energies
to be diverted to increasing their remuneration at the expense of enterprise
growth and employment. The third factor is capital income. In Europe?but less
so in the United States?private wealth (relative to national income) has followed a
spectacular U-shaped path over time, and inherited wealth may be making a return,
implying that inheritance and capital income taxation will become again central
policy tools for curbing inequality. The final, little-investigated, element is the
correlation between earned income and capital income, which have become more
closely associated in the United States."
The Top 1 Percent in International and Historical Perspective
