The Quarterly Journal of Economicshas published a new paper by RSF grantees Emmanuel Saez and Gabriel Zucman (University of California, Berkeley) and Thomas Piketty (Paris School of Economics) that details findings from their research on the effects of government redistribution on economic inequality.
In their 2016 study, the authors combined tax, survey, and national accounts data to estimate the distribution of national income in the U.S. since 1913. These distributional accounts allowed them to capture 100% of national income and compute growth rates for each quantile of the income distribution. They found that between 1980 and 2014, the average pre-tax national income per adult stagnated for the bottom 50% of the income distribution. Yet, during this same time period, income boomed at the top: in 1980, the top 1% of adults earned on average 27 times more than the bottom 50% of adults; today, the top 1% earns 81 times more. As David Leonhardt wrote in the New York Times, “The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.”
In their most recent paper, Saez, Zucman, and Piketty note that distributional national accounts can also be used to compare changes in income and measure the effects of government redistribution on inequality across different countries. In the figure below, based on another study by Piketty and colleagues, they compare the change in average pre-tax national income for the bottom 50% of the income distribution in France to that of the bottom 50% in the U.S. “In sharp contrast with the United States, in France the average pretax income of the bottom 50% grew by 32% from 1980 to 2014 (after adjusting for inflation), at approximately the same rate as national income per adult,” they write. “While average income for the bottom half of the distribution was 11% lower in France than in the United States in 1980, it is now 16% higher.”
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Although overall, average income per adult in France is 35% lower than it is in the U.S., as the graph above shows, the bottom 50% in France makes more than the bottom half of the income distribution in the U.S. The authors conclude, “The diverging trends in the growth of bottom 50% incomes across France and the United States—two advanced economies subject to the same forces of technological progress and globalization—suggests that domestic policies play an important role for the dynamics of income inequality.”
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