What did Saez and Piketty learn about inequality from tax data?

Piketty and Saez (2003) found that income inequality rose substantially between 1979 and 2002 because the top 10 percent of the income distribution took 91 percent of the income growth during that period. As the real incomes of the top 10 percent soared, the incomes of the bottom 90 percent stagnated.

What is the Zucman Saez database?

World Inequality Database (WID), previously The World Wealth and Income Database, also known as WID. world, is an extensive, open and accessible database “on the historical evolution of the world distribution of income and wealth, both within countries and between countries”.

What is the wealth to income ratio?

The combined wealth-to-income ratio of all U.S. households was 6.6 in 2016, and likely increased further in early 2017 as equity markets and broad house-price indexes moved notably higher. Clearly, U.S. household wealth is very high now by virtually any measure.

What is a capital income ratio?

The Capital to Income Ratio is the most important ratio discussed in Charles Farrell’s Your Money Ratios. It’s the ratio of your retirement stash divided by your current income. If your income has recently increased significantly, average your last four years of income.

How did income inequality lead to the Great Depression?

The Great Depression was partly caused by the great inequality between the rich who accounted for a third of all wealth and the poor who had no savings at all. As the economy worsened many lost their fortunes, and some members of high society were forced to curb their extravagant lifestyles.

How does the Lorenz curve show income inequality?

Understanding the Lorenz Curve While the Lorenz curve is most often used to represent economic inequality, it can also demonstrate unequal distribution in any system. The farther away the curve is from the baseline, represented by the straight diagonal line, the higher the level of inequality.

What caused the great compression?

The compression in the wage structure from 1940 to 1950 may have been caused by factors unique to the World War Il period or, alternatively, may have been a continuation of secular forces disrupted during or accelerated by the Great Depression.

How would a progressive wealth tax work?

A progressive wealth tax is an annual tax levied on the net wealth that a family (or an individual) owns above an exemption threshold. Net wealth includes all assets (financial and nonfinancial) net of all debts. The tax can be levied at progressive marginal tax rates above the exemption threshold.

Why is income inequality a problem?

Enough economic inequality can transform a democracy into a plutocracy, a society ruled by the rich. Large inequalities of inherited wealth can be particularly damaging, creating, in effect, an economic caste system that inhibits social mobility and undercuts equality of opportunity.

What are the three main causes of income inequality?

Income inequality varies by social factors such as sexual identity, gender identity, age, and race or ethnicity, leading to a wider gap between the upper and working class.

What causes income inequality?

The rise in economic inequality in the U.S. is tied to several factors. These include, in no particular order, technological change, globalization, the decline of unions and the eroding value of the minimum wage.

What is the relationship between the Gini coefficient and Lorenz curve?

The Gini coefficient is the ratio of the area between the line of perfect equality and the observed Lorenz curve to the area between the line of perfect equality and the line of perfect inequality. The higher the coefficient, the more unequal the distribution is.