GLOBAL TRENDS IN INCOME DISTRIBUTION: LONG-RUN INFLUENCES ON INCOME INEQUALITY

This paper provides a comprehensive overview of the development in income distribution and outlines its major long-term trends of 23 countries worldwide. These countries are clustered in four groups covering the core advanced, the Nordic, the emerging, and the least developed economies of the world. This paper applies different measures to analyse income distribution in three dimensions: national income, functional income distribution, and personal income distribution. Depending on the indicators applied the time period ranges between 1960 and 2012. The empirical analysis shows that increases in national incomes are most pronounced in the advanced economies. The emerging economies also exhibit an upward trend in national income, but it has been less substantial. The least developed economies, however, have been detached from this trend and remain isolated. Moreover, this paper illustrates that there has been an enormous re-distribution of income. During the last three decades, the labour share of income has declined in nearly all countries under study. This development went hand in hand with increased personal income inequality. Disposable income inequality and market income inequality have both increased over the past 30 years. Wage dispersion also rose substantially contributing to greater income inequality. Additionally, the escalation of top income shares as well as the expansion of low paid employment has led to a growing gap between the top and the bottom income earners. This analysis also presents important interlinks between greater income inequality, the fall of the wage share, and increasing wage dispersion

The empirical case for a wage-led recovery policy for Europe

The Europe 2020 strategy of the European Commission (EC) as well as the national reform and stability programmes attribute a central role to wage moderation policies. Real wage growth below productivity growth and policies to deregulate the labour market in order to achieve this are recommended to increase the international competitiveness of the EU. However, the track record of these policies in the last three decades has been poor growth performance along with a declining share of wages in national income and rising inequality. Our results of a new project for the Foundation for European Progressive Studies (FEPS) show that the EC policy of wage moderation is counter-productive, and leads to a stagnation in growth, risk of deflation, and destabilizing growth models driven by debt or export surpluses in the absence of a healthy growth in wages

The effect of income distribution and fiscal policy on growth, investment, and budget balance: the case of Europe

This paper develops a multi-country Post-Kaleckian model augmented by a government sector with public spending and taxes on consumption, labour and capital and estimates it for the EU15 countries. We estimate country specific equations to find the effect of income distribution, public spending and taxes on growth, on each component of private aggregate demand (i.e., consumption, investment, and net exports) and on budget balance for the EU15 countries. Next, we calculate a Europe-wide multiplier based on the responses of each country to changes not only in domestic income distribution, taxation and government expenditure but also to changes in the other European countries’ wage share, taxes and public spending. One novelty of this paper is that it goes beyond an isolated country-by-country analysis and integrates cross-country effects of a simultaneous change in the wage share on demand in Europe in a government augmented Post-Kaleckian model.Extending the model by taxes on labour and capital increases the likelihood of a wage-led economic regime. The fiscal multiplier effects are much stronger when policies are implemented simultaneously, and wage, tax and public spending policies are integrated into the policy mix. The impact of egalitarian wage policies are positive but small; the overall stimulus becomes much stronger when mixed with fiscal expansion. Expansionary fiscal policy is sustainable when wage, public spending and progressive tax policies are combined. The analysis of the paper can guide the development of a fiscal and wage policy mix conducive to equitable development

A coordinated mix of public investment and incomes policies for sustainable development in Europe

This policy brief presents the impact of a coordinated policy mix of increased public investment together with more progressive taxation and labour market policies to improve income distribution in Europe. Based on an econometric model for individual EU Member states, we simulate a policy scenario of a simultaneous increase in public investment by 1% of GDP along with more progressive taxation (increasing effective tax burden on capital by 1% and decreasing tax burden on labour by 1%) and an increase in the wage share by 1% of GDP in each country. The result is 6.6% higher GDP in the EU. Even private investment increases by 1.5% as a ratio to GDP (on average in Europe) as an outcome of this policy mix; i.e. public spending does not crowd out but rather crowds in private investment. Despite the rise in public spending, the budget balance in Europe improves (by 0.8% as a ratio to GDP) because the beneficial fiscal effects of higher economic growth and higher tax rates on capital prevail. Growth and private investment improves both in the periphery and core countries of Europe. The concerns regarding the inflationary effects of wage increases are also not supported by empirical evidence. This policy mix will lead to only a modest 1.5 percentage point increase in price level in Europe on average. Hence wage-led and public investment-led growth are complimentary and feasible. Such a coordinated policy mix, along with a properly designed industrial policy can ensure genuine regional convergence and social cohesion in Europe

The role of public spending and incomes policies for investment and equality-led development in the UK

This policy brief presents how a mix of fiscal and labour market policies could affect growth, investment and public budget in the UK. Based on an econometric model, we simulate the joint impact of an increase in public spending by 1% of GDP (about £20bn per year) along with more progressive taxation (increasing effective tax burden on capital by 1% and decreasing tax burden on labour by 1%) and an increase in the wage share by 1% of GDP. As a result, GDP increases by 3.7%. Private investment increases as well by 0.7% as a ratio to GDP. The budget balance in the UK improves by 0.2% as a ratio to GDP. Inflation increases only slightly: the price level goes up by 1.8 percentage points. The effects are even more favourable if policies are implemented simultaneously together with our trade partners in the EU

An Investment and Equality-Led Sustainable Development Strategy for Europe

Austerity policies coupled with rising inequality in Europe have resulted in a prolonged stagnation and a vicious circle of chronically low demand, slow down in investment and productivity, and economic, social and political instability. In order to end this vicious cycle, Europe needs directed public investment policies accompanied by industrial policy, higher equality, stimulated demand, and regulation of finance and corporate governance. Our research presents strong empirical evidence that expansionary fiscal policy is sustainable when wage and public investment policies are combined with progressive tax policy; the impact is stronger when these policies are implemented in a coordinated fashion across Europe due to strong positive spill over effects on demand. A strong investment performance also requires a process of de-financialization of the economy and a new approach to corporate governance

Wage-led growth in the EU15 member states: the effects of income distribution on growth, investment, trade balance, and inflation

This paper estimates a multi-country demand-led growth model for EU15 countries. A decrease in the share of wages in national income in isolation leads to lower growth in Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom, whereas it stimulates growth in Austria, Belgium, Denmark and Ireland. However, a simultaneous decline in the wage share leads to an overall decline in EU15 GDP; hence EU15 as a whole is a wage-led economy. Furthermore, Austria and Ireland also experience negative effects on growth when they decrease their wage share along with their trading partners. The results indicate that a decline in the wage share has had significant negative effects on growth in the EU15 countries and supports the case of wage coordination. We present different wage-led recovery scenarios taking into account further effects of a change in the wage share on prices, nominal unit labour costs, investment, and net exports

Spectral Control via Multi-Species Effects in PW-Class Laser-Ion Acceleration

Laser-ion acceleration with ultra-short pulse, PW-class lasers is dominated by non-thermal, intra-pulse plasma dynamics. The presence of multiple ion species or multiple charge states in targets leads to characteristic modulations and even mono-energetic features, depending on the choice of target material. As spectral signatures of generated ion beams are frequently used to characterize underlying acceleration mechanisms, thermal, multi-fluid descriptions require a revision for predictive capabilities and control in next-generation particle beam sources. We present an analytical model with explicit inter-species interactions, supported by extensive ab initio simulations. This enables us to derive important ensemble properties from the spectral distribution resulting from those multi-species effects for arbitrary mixtures. We further propose a potential experimental implementation with a novel cryogenic target, delivering jets with variable mixtures of hydrogen and deuterium. Free from contaminants and without strong influence of hardly controllable processes such as ionization dynamics, this would allow a systematic realization of our predictions for the multi-species effect.Comment: 4 pages plus appendix, 11 figures, paper submitted to a journal of the American Physical Societ

The effects of income distribution and fiscal policy on aggregate demand, investment and the budget balance: the case of Europe

This paper develops a multi-country post-Kaleckian model that incorporates the role of the government. One key novelty of the model is that it integrates cross-country effects of both changes in income distribution and fiscal policy. The model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in EU15 countries. The results show that a simultaneous increase in the wage share in all EU15 countries would increase demand and the primary budget balance in all countries. A simultaneous increase in government spending turns out to boost economic activity in all the EU15 countries, indicating the positive economic effects of expansionary fiscal policy. Moreover, a progressive tax policy that would be implemented simultaneously at the EU level would lead to an increase in output in all countries