Economic inequality, an introduction.

In this paper we offer an introductory exploration of inequality, considering how political economy has analysed economic inequality. Its roots in market processes and in the functional distribution of income are investigated, considering the role of human capital, technological change and globalisation, and the relevance of intergenerational inequalities. We then consider the impact that public policies can have on inequalities through taxation, welfare expenditures, the provision of public services, redistribution and other actions.Inequality, Distribution, Welfare.

Explaining inequality in today’s capitalism.

Inequality within advanced countries has returned to levels typical of a century ago. At the global level it remains extremely high despite the rapid growth of major developing countries such as China, India and Brazil. This makes inequality a major economic issue, social problem and political challenge in today’s capitalism. However, economic inequality is the object of limited research efforts and attracts modest attention in the political arena.This is the result of several factors. Mainstream approaches view inequality as a necessary condition – or, at best, an unfortunate side effect - for achieving the more general objectives of economic growth and market efficiency. Most studies emphasise that inequality is to a large extent the consequence of international forces laying beyond the reach of policies by nation-states. More importantly, today’s inequality is the result of a variety of processes that have seriously increased its complexity, with major changes in its nature and mechanisms, compared to past decades. To the fundamental divide between capital and labour in the distribution of income between social classes and groups, new mechanisms have been added, that have fuelled income inequalities among individuals, rooted in the rise of top incomes, technological change, international production, labour markets, influence of families of origin and lack of intergenerational mobility. In this paper we propose an overall interpretation of the trajectory of inequality. The functional income distribution that leads to inequalities in factor incomes, with an increasing divide between the growing share of profits and financial rents – free to move across national borders, escape taxation and search for speculative gains – and the dwindling share of wages, nation-bound and unable to escape taxes. The specificity of top incomes – that combine rents, profits and “superstar” labour compensation complicates this picture with the effects of pro-rich policy changes. Inequalities have also strongly increased within wages, resulting from several factors. Education has an obvious influence, but plays a much smaller role than mainstream views would expect. Skill differences are increasingly important, and need to be examined in the context of specific professional groups, rather than with wide generalisations. Industry specificities, technology and international production do play a role, but in complex ways, depending on the nature of innovative strategies, local competences, market power and demand dynamics. Labour market arrangements – unionisation, presence of minimum wages or national contracts, diffusion of temporary or part-time labour contracts, etc. – are increasingly important factors in explaining the low pay of many young and low-skilled workers. Outside labour markets and the opportunities for social mobility promised by education, the family of origin remains a major determinant of individuals’ education and incomes, with an increasingly strong persistence of inequality across generations. The interpretation we provide offers a new explanation of the nature of today’s economic inequalities, of its consequences, and possible remedies.Inequality, Distribution, Welfare.

La disuguaglianza dei redditi in Italia. Non solo un problema di altezza.

Negli ultimi decenni la disuguaglianza nei redditi disponibili in Italia è  cresciuta molto meno della disuguaglianza nei redditi  di mercato. La spiegazione sta nell’apparente crescente intensità della redistribuzione realizzata dallo stato attraverso le imposte dirette e i trasferimenti monetari, tra i quali hanno un ruolo essenziale le pensioni. Il forte peggioramento della disuguaglianza nei redditi di mercato  risente anche della crescente disuguaglianza nei redditi da lavoro,  alla base della quale non vi è soltanto il maggior rendimento del capitale umano, come di norma si sostiene, ma una  serie di altri fattori, di difficile individuazione, che, comunque, sono collegati alle origini familiari e, quindi,  configurano una limitata mobilità sociale intergenerazionale. Tutto ciò suggerisce di guardare non soltanto all’altezza della disuguaglianza ma anche ai processi che la generano e che possono definirne il grado di accettabilità. L’attenzione verso quei processi ha implicazioni per  individuare le politiche più appropriate per contrastare la disuguaglianza.

The Engines of Inequality

In Europe and in the United States, one of the legacies of the economic and financial crisis will no doubt be a high and particularly worrying level of economic inequality. Inequality has roots that go well beyond the 2008 collapse, but the stagnation that has followed it has made disparities in income and wealth more serious and more difficult to eradicate. In this article we suggest an interpretation of inequality that is parsimonious enough to identify the fundamental mechanisms at work, capable of accounting for its complexity and, at the same time, adequate for identifying appropriate policy measures. We begin with the basic facts on the rise of inequality in advanced countries

L’iniqua (e miope) distribuzione mondiale dei vaccini (seconda parte)

Gli autori continuano la loro riflessione sulla distribuzione dei vaccini a livello globale indicando anche le linee d’azione più appropriate al riguardo

L’iniqua (e miope) distribuzione mondiale dei vaccini

Giuseppe De Arcangelis e Maurizio Franzini analizzano la distribuzione dei vaccini a livello globale e valutano il rischio che essa si traduca in una “catastrofe morale” nei confronti dei paesi più poveri

La Recovery e i suoi molti problemi

Mentre si moltiplicano gli inviti a pensare ai progetti da finanziare con il Recovery Fund, e la parola Recovery ricorre con grande frequenza, forse non ci si chiede abbastanza: che problemi si pongono per la ripresa e cosa si può fare per agevolarla, in tempi relativamente brevi? Per rispondere a queste domande è utile ricordare innanzitutto le principali caratteristiche della crisi in cui siamo immersi nonché le politiche fin qui adottate per contrastarla, e i loro effetti

Subjective ambiguity and moral hazard in a principal-agent model

It is suggested that individual behavior under ambiguity, or knightian uncertainty, may represent an alternative explanation for contractual incompleteness with respect to the traditional approach in terms of transactions costs. This paper aims at showing that the introduction of ambiguity in the economic analysis of contracts may be very fruitful. In particular, we analyze how ambiguity affects the optimal compensation scheme in a principal-agent framework, where the principal cannot observe the agent’s effort and, contrary to standard assumptions, is ambiguityaverse. Also, our model makes it possible to generalize the Mukerji (1998) approach to contractual incompleteness. In fact, it shows that incomplete contracts are costly and that, before reaching the conclusion that ambiguity leads to contractual incompleteness, their costs should be compared with those of complete contracts, other things being equal

Cooperation and reciprocity: a theoretical approach

Cooperation among genetically unrelated agents occurs in many situations where economic theory would not expect it. A too narrow conception of self-interest is widely considered the culprit. In particular, relying on experimental evidence in plenty, we consider strong reciprocity rules of behaviour, according to which it is worth bearing the cost of punishing those who defect, and we give analytical foundation to such behaviour – and more generally to cooperation-proneness. The basic idea is that most agents may include self-esteem in their utility function and actually produce or destroy self-esteem through their effective behaviour. The latter amounts to introducing a moral system in individual behaviour in such a way to make it amenable to rational maximization. We also show how the presence of cooperation-prone agents may impact on the best contract in Principal-Agents situations by altering the convenience of gift giving and trust