The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no substantive empirical evidence of an effect of income inequality on aggregate consumption. (authors' abstract) / Series: Department of Economics Working Paper Series

The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no empirical evidence of a negative effect of income inequality on aggregate consumption.

This paper evaluates the impact of a large macroeconomic shock on poverty. In particular, we use longitudinal data from the European Survey on Income and Living Conditions (EU-SILC) comprising almost two million individuals from 29 European countries in order to quantify changes in poverty transition patterns caused by the 2007 global financial crisis. Because the crisis was largely unforeseeable, it provides an appealing natural experiment allowing us to isolate the causal effect of a substantial macroeconomic shock on poverty. Employing semiparametric mixed discrete time survival analysis, we find that conditional poverty entry hazards increased temporarily by 13.4% during the crisis, while post-crisis they are estimated to be 15.7% lower than before. Not only entry hazards have decreased, also conditional exit hazards are estimated to be 31.4% lower post-crisis compared to before. Ceteris paribus, the crisis therefore has made it more difficult to slip into poverty, yet those who were already poor face substantially lower prospects to escape. Exploring determinants of poverty transitions, we find that being retired, having a permanent job, owning one's dwelling instead of renting it, age, marital status, and household size are the most important protective factors against poverty. Finally, we show that mostly a housing cost overburden seems to be responsible for the persistence of poverty. / Series: INEQ Working Paper Series

This paper argues that the cumulative causation processes between wealth and power risk leading to an escalation of wealth inequality. We confirm with new survey data for the Eurozone Piketty's conclusions that wealth is highly concentrated and that this inequality is perpetuated through dynastic wealth. This leads to an ever-concentrating ability to shape economic and political institutions. While neoclassical economics has a blind spot where power is concerned, we discuss how heterodox approaches have attempted to conceptualize this structural power which influences the framework of economic activity. Finally, we discuss three concrete channels through which the unequal distribution of private assets may affect power relations and economic activity.

Series: INEQ Working Paper Series

We study how attitudes to inheritance taxation are influenced by information about the role of inherited wealth in society. Using a randomized experiment in a register-linked Swedish survey, we find that informing individuals about the large aggregate importance of inherited wealth and its link to inequality of opportunity significantly increases the support for inheritance taxation. The effect is almost uniform across socio-economic groups and survives a battery of robustness tests. Changes in the perceived economic importance of inherited wealth and altered views on whether luck matters most for economic success appear to be the main driving factors behind the treatment effect. Our findings suggest that the low salience of inherited wealth could be one explanation behind the relatively marginalized role of inheritance taxation in developed economies. / Series: INEQ Working Paper Series

We assess the impact of the ECB's unconventional monetary policy (UMP) on the wealth distribution of households in ten euro area countries. For this purpose, we estimate the effects of an ECB balance sheet expansion on financial asset and housing prices by means of vector autoregressions. We then use the estimates to carry out micro simulations based on data from the Household Finance and Consumption Survey (HFCS). We find that the overall effect of UMP on the net wealth distribution of households differs depending on which wealth inequality indicators we use. There is an inequality-increasing effect for the majority of the countries under review when we use wealth inequality indicators that are sensitive to changes at the tails of the wealth distribution. The effect is more equalizing when we base our assessment on the Gini coefficient. It is also important to note that one-third of the households in our sample does not hold financial or housing wealth and is thus not directly affected by UMP measures via the asset price channel. / Series: Department of Economics Working Paper Series

This paper explores the relationship between household income inequality and macroeconomic uncertainty in the United States. Using a novel large-scale macroeconometric model, we shed light on regional disparities of inequality responses to a national uncertainty shock. The results suggest that income inequality decreases in most states, with a pronounced degree of heterogeneity in terms of the dynamic responses. By contrast, some few states, mostly located in the Midwest, display increasing levels of income inequality over time. Forecast error variance and historical decompositions highlight the importance of uncertainty shocks in explaining income inequality in most regions considered. Finally, we explain differences in the responses of income inequality by means of a simple regression analysis. These regressions reveal that the income composition as well as labor market fundamentals determine the directional pattern of the dynamic responses. / Series: Working Papers in Regional Science

Poverty is a widely researched topic in economics. However, despite growing research on the economic lives of lesbians and gay men in the United States since the mid 1990s, very little is known about poverty in same-sex couple households. This study uses American Community Survey data from 2010 to 2014 to calculate poverty rates for households headed by different-sex versus same-sex couples. Comparing households with similar characteristics, the results show that those headed by same-sex couples are more likely to be in poverty than those headed by different-sex married couples. Despite that overall disadvantage, a decomposition of the poverty risk shows that same-sex couples are protected from poverty by their higher levels of education and labor force participation, and their lower probability of having a child in the home. Lastly, the role of gender - above and beyond sexual orientation - is clear in the greater vulnerability to poverty for lesbian couples.

Este documento intenta analizar la evolución de la desigualdad en ingresos y sus determinantes para Colombia durante el período 1992-2012. Para ello se implementan dos metodologías complementarias, por un lado, se aplica una estrategia de descomposiciones microeconométricas implementada por Gasparini et al. (2005). Dicho enfoque metodológico permite evaluar el efecto de algunos factores que se creen explican los cambios distributivos en Colombia durante el período 1992-2012, en cuanto a dirección y magnitud. Luego se realiza un ejercicio complementario mediante la descomposición del índice de Gini por fuente de ingresos basada en Lerman y Yitzhaki (1985), para evaluar la tendencia y la contribución de cada una de las fuentes de ingreso en la desigualdad para el período bajo análisis. Los resultados de la primera metodología muestran que los factores más importantes en explicar los cambios en la distribución del ingreso para la década de los noventa fueron los retornos a la educación, seguido de los factores no observados y la estructura educativa. Para la década siguiente, tenemos dos conjuntos claros de factores que van en direcciones opuestas. Por un lado, tenemos el conjunto de los retornos a las características observables, los factores no observados y la estructura educativa, que en mayor o menor medida tienen un efecto igualador durante toda la década. Por otro lado, tenemos los efectos de horas de trabajo y la estructura del empleo que presentan un efecto desigualador durante ese período. El análisis de descomposición por fuente de ingreso muestra que los ingresos laborales son los más importantes en determinar la desigualdad durante las últimas dos décadas, aunque pierden relevancia y los ingresos no laborales aumentan su importancia. La renta imputada presenta diferencias importantes en términos de nivel cuando se utilizan metodologías alternativas, pero la evolución es similar para dichas metodologías de imputación.