by Russ Roberts on June 19, 2008

in Inequality

Dew-Becker and Gordon write (HT: Arnold Kling):

Only the top 10% of US earners have seen their incomes grow faster
than productivity since 1966. Part of the top-earner income growth is
driven by market forces (superstar economics); the only feasible
pro-equality policy here is more progressive taxation.

Two questions:

1. What does "the" top 10% mean over a forty year period when there are huge changes in family structure and immigration? I will try and read the paper but "the" top 10% is an awfully slippery concept. The statement certainly doesn’t mean what it sounds like.

2. Why would more progressive taxation lead to more equality? Increasing the progressivity of the tax code would increase pre-tax measured inequality. Does anyone have a model or an estimate of the impact on post-tax and post-transfer inequality. My guess is that it would be modest at best.

The only decent (and I mean that in more than one sense) policy to reduce inequality is a policy that improves the school experience of the least-skilled children. 


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