Income inequality in the Nordic countries — Denmark, Finland, Norway, and Sweden — is substantially lower than in the United States or the United Kingdom despite similar levels of per capita income. The Gini coefficient for disposable income in Nordic countries averages 0.27, compared to 0.39 in the US and 0.36 in the UK. In Income Equality in the Nordic Countries: Myths, Facts, and Lessons (NBER Working Paper 33444), Magne Mogstad, Kjell G. Salvanes, and Gaute Torsvik analyze the underlying source of these disparities. They employ detailed microeconomic data and statistical decomposition techniques and consider distributional statistics on income, wages, working hours, education, and skills across these countries.
Do Employers Have More Monopsony Power in Slack Labor Markets?
This article confronts monopsony theory’s predictions regarding workers’ wages with observed wage patterns over the business cycle. Using German administrative data for the years 1985 to 2010 and an estimation framework based on duration models, the authors construct a time series of the labor supply elasticity to the firm and estimate its relationship to the unemployment rate. They find that firms possess more monopsony power during economic downturns. Half of this cyclicality stems from workers’ job separations being less wage driven when unemployment rises, and the other half mirrors that firms find it relatively easier to poach workers. Results show that the cyclicality is more pronounced in tight labor markets with low unemployment, and that the findings are robust to controlling for time-invariant unobserved worker or plant heterogeneity. The authors further document that cyclical changes in workers’ entry wages are of similar magnitude as those predicted under pure monopsonistic wage setting.
Unequal exchange of labour in the world economy
Researchers have argued that wealthy nations rely on a large net appropriation of labour and resources from the rest of the world through unequal exchange in international trade and global commodity chains. Here we assess this empirically by measuring flows of embodied labour in the world economy from 1995–2021, accounting for skill levels, sectors and wages. We find that, in 2021, the economies of the global North net-appropriated 826 billion hours of embodied labour from the global South, across all skill levels and sectors. The wage value of this net-appropriated labour was equivalent to €16.9 trillion in Northern prices, accounting for skill level. This appropriation roughly doubles the labour that is available for Northern consumption but drains the South of productive capacity that could be used instead for local human needs and development. Unequal exchange is understood to be driven in part by systematic wage inequalities. We find Southern wages are 87–95% lower than Northern wages for work of equal skill. While Southern workers contribute 90% of the labour that powers the world economy, they receive only 21% of global income.
Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records
Abstract. We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by fi
New Capitalism II: Compositional vs income inequality
Are all class-based societies unequal?
The Divide — Jason Hickel
The Divide: A Brief Guide to Global Inequality and its Solutions Penguin Random House UK, 2017
AI Adoption and Inequality
There are competing narratives about artificial intelligence’s impact on inequality. Some argue AI will exacerbate economic disparities, while others suggest it could reduce inequality by primarily disrupting high-income jobs. Using household microdata and a calibrated task-based model, we show these narratives reflect different channels through which AI affects the economy. Unlike previous waves of automation that increased both wage and wealth inequality, AI could reduce wage inequality through the displacement of high-income workers. However, two factors may counter this effect: these workers’ tasks appear highly complementary with AI, potentially increasing their productivity, and they are better positioned to benefit from higher capital returns. When firms can choose how much AI to adopt, the wealth inequality effect is particularly pronounced, as the potential cost savings from automating high-wage tasks drive significantly higher adoption rates. Models that ignore this adoption decision risk understating the trade-off policymakers face between inequality and efficiency.
Handbook of Labor Economics
What new tools and models are enriching labor economics?Developments in Research Methods and their Application, Volume 4A summarizes recent advances in the ways economists study wages, employment, and labor markets. Mixing conceptual models and empirical work, contributors cover subjects as diverse as field and laboratory experiments, program evaluation, and behavioral models. The combinations of these improved empirical findings with new models reveal how labor economists are developing new and innovative ways to measure key parameters and test important hypotheses. - Investigates recent advances in methods and models used in labor economics - Demonstrates what these new tools and techniques can accomplish - Documents how conceptual models and empirical work explain important practical issues
Are new technologies fuelling wage inequality? Evidence from Spain
New research shows the net effect of technological change (incl. artificial intelligence) on wages in Spain has been to fuel rising wage inequalities
The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries
Debates on how to reduce poverty and inequality have focused on two controversial questions: Should social policies be targeted to low-income groups or be universal? Should benefits be equal for all or earnings-related? Traditional arguments in favor of targeting and flat-rate benefits, focusing on the distribution of the money actually transferred, neglect three policy-relevant considerations: (1) The size of redistributive budgets is not fixed but reflects the structure of welfare state institutions. (2) A trade-off exists between the degree of low-income targeting and the size of redistributive budgets. (3) Outcomes of market-based distribution are often more unequal than those of earnings-related social insurance programs. We argue that social insurance institutions are of central importance for redistributive outcomes. Using new data, our comparative analyses of the effects of different institutional types of welfare states on poverty and inequality indicate that institutional differences lead to unexpected outcomes and generate the paradox of redistribution: The more we target benefits at the poor and the more concerned we are with creating equality via equal public transfers to all, the less likely we are to reduce poverty and inequality.
How Much Redistribution Will AI Require? - Marginal REVOLUTION
How much redistribution will AI require? A common scenario is that AI raises output enormously, but labor’s share of income collapses. GDP per capita goes up but workers get poorer, and making workers whole requires massive redistribution. In my latest paper, I run the numbers and conclude that this is probably incorrect. The idea is […]
Les inégalités aux Etats-Unis (2/5) : l'importance du pouvoir des travailleurs
traduction française du billet de blog "The importance of worker power. Understanding inequality: Part II" de Paul Krugman
Work, Justice, and Collective Capital Institutions: Revisiting Rudolf Meidner and the Case for <span style="font-variant:small-caps;">Wage‐Earner</span> Funds
ABSTRACT This article makes the case for a specific variety of what we call Collective Capital Institutions (CCIs), by returning to the idea of Wage‐Earner Funds (WEFs) – a 1970s Swedish policy proposal designed gradually to shift ownership and control over parts of the economy to democratically controlled institutions. We identify two attractive rationales in favour of such a scheme and argue that both can fruitfully be transposed to the current worldwide economic situation. The egalitarian rationale is that WEFs could help in the pursuit of equality by giving a wider set of people a stake in collectively owned companies and a right to their profits. The democratic rationale is that WEFs redistribute not only these profits, but also the power over economic decisions made within companies. We then contrast such schemes for collective capital ownership with the similar but much more privatised proposals set out in, for instance, John Rawls's idea of a ‘property‐owning democracy’. We argue that CCIs ultimately are more likely to contribute to the development of the ‘sense of justice’ within society that is needed for a stable just society. We conclude that CCIs deserve a great deal more exploration in academic and political discussions of egalitarian economic systems.
A Growing Gender Divide in the AI Economy — The Honest Economist
The article argues that AI is reshaping gender inequality even before the pay gap visibly widens. Women are more concentrated in clerical and administrative roles where AI can restructure work, while men are more concentrated in technical, AI-complementary roles. Among college graduates, the exposur
Global Inequality — Harvard University Press
Winner of the Bruno Kreisky Prize, Karl Renner InstitutA Financial Times Best Economics Book of the Year An Economist Best Book of the Year A Livemint Best Book of the YearOne of the world’s leading economists of inequality, Branko Milanovic presents a bold new account of the dynamics that drive inequality on a global scale. Drawing on vast data sets and cutting-edge research, he explains the benign and malign forces that make inequality rise and fall within and among nations. He also reveals who has been helped the most by globalization, who has been held back, and what policies might tilt the balance toward economic justice.“The data [Milanovic] provides offer a clearer picture of great economic puzzles, and his bold theorizing chips away at tired economic orthodoxies.”—The Economist“Milanovic has written an outstanding book…Informative, wide-ranging, scholarly, imaginative and commendably brief. As you would expect from one of the world’s leading experts on this topic, Milanovic has added significantly to important recent works by Thomas Piketty, Anthony Atkinson and François Bourguignon…Ever-rising inequality looks a highly unlikely combination with any genuine democracy. It is to the credit of Milanovic’s book that it brings out these dangers so clearly, along with the important global successes of the past few decades.—Martin Wolf, Financial Times
The PEPPER V Report - Kelso Institute Europe
This Report provides an overview of the development of employee financial participation, i.e., employee share ownership and profit sharing, across the EU-27, the United Kingdom, and the United States of America as of January 2024. Against the background of the policy development of the past 35 years, it highlights the growth of financial participation over the last decade using the most recent cross-country data available, i.e., the 2021 CRANET Survey, the 2019 European Company Survey and the 2015 European Working Conditions Survey, which also show its potential positive impact on employment and productivity.
a simple (local) solution to the pay gap — wingolog
wingolog: article: a simple (local) solution to the pay gap