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The Top 1 Percent in International and Historical Perspective

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  • Facundo Alvaredo
  • Anthony B. Atkinson
  • Thomas Piketty
  • Emmanuel Saez

Abstract

The top 1 percent income share has more than doubled in the United States over the last thirty years, drawing much public attention in recent years. While other English speaking countries have also experienced sharp increases in the top 1 percent income share, many high‐income countries such as Japan, France, or Germany have seen much less increase in top income shares. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century experienced in virtually all high‐income countries. We highlight four main factors. The first is the impact of tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares. The effects of top rate cuts can operate in conjunction with other mechanisms. The second factor is indeed a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Indeed, top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment. The third factor is capital income. Overall, private wealth (relative to income) has followed a U-shaped path over time, particularly in Europe, where inherited wealth is, in Europe if not in the United States, making a return. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19075.

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Date of creation: May 2013
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Publication status: published as Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
Handle: RePEc:nbr:nberwo:19075

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  1. Anthony B. Atkinson, 2012. "The Mirrlees Review and the State of Public Economics," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 50(3), pages 770-80, September.
  2. Thomas Piketty, 2011. "On the Long-Run Evolution of Inheritance: France 1820--2050," The Quarterly Journal of Economics, Oxford University Press, Oxford University Press, vol. 126(3), pages 1071-1131.
  3. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles, Harvard University Department of Economics 2766676, Harvard University Department of Economics.
  4. Henrik Jacobsen Kleven & Camille Landais & Esben Schultz, 2013. "Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark," The Quarterly Journal of Economics, Oxford University Press, Oxford University Press, vol. 129(1), pages 333-378.
  5. Edward N. Wolff & Maury Gittleman, 2011. "Inheritances and the Distribution of Wealth Or Whatever Happened to the Great Inheritance Boom?," BCL working papers, Central Bank of Luxembourg 55, Central Bank of Luxembourg.
  6. Christoph Schinke, 2012. "Inheritance in Germany 1911 to 2009: A Mortality Multiplier Approach," SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin, The German Socio-Economic Panel (SOEP) 462, DIW Berlin, The German Socio-Economic Panel (SOEP).
  7. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(1), pages 1-39, February.
  8. Wojciech Kopczuk & Emmanuel Saez, 2004. "Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns," NBER Working Papers, National Bureau of Economic Research, Inc 10399, National Bureau of Economic Research, Inc.
  9. Peter A. Diamond & Emmanuel Saez, 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations," CESifo Working Paper Series, CESifo Group Munich 3548, CESifo Group Munich.
  10. Martin Feldstein, 1993. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act," NBER Working Papers, National Bureau of Economic Research, Inc 4496, National Bureau of Economic Research, Inc.
  11. Piketty, Thomas & Zucman, Gabriel, 2013. "Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9588, C.E.P.R. Discussion Papers.
  12. Atkinson, A B, 2008. "The Changing Distribution of Earnings in OECD Countries," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199532438, October.
  13. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 49(1), pages 3-71, March.
  14. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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  1. The top 1 percent
    by Economic Logician in Economic Logic on 2013-07-30 14:49:00
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Cited by:
  1. Campos-Vazquez, Raymundo M. & Chavez, Emmanuel & Esquivel, Gerardo, 2013. "Growth is (really) good for the (really) rich," MPRA Paper, University Library of Munich, Germany 52488, University Library of Munich, Germany.
  2. Jon D. Wisman & Aaron Pacitti, 2013. "Ending the Crisis With Guaranteed Employment and Retraining," Working Papers, American University, Department of Economics 2013-12, American University, Department of Economics.
  3. Godar, Sarah & Paetz, Christoph & Truger, Achim, 2014. "Progressive tax reform in OECD countries : perspectives and obstacles," ILO Working Papers, International Labour Organization 485510, International Labour Organization.
  4. De Donder, Philippe & Roemer, John E, 2013. "An allegory of the political influence of the top 1%," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9745, C.E.P.R. Discussion Papers.
  5. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers, Institute for the Study of Labor (IZA) 8220, Institute for the Study of Labor (IZA).
  6. John Foster & William Paul Bell & Phil Wild & Deepak Sharma & Suwin Sandu & Craig Froome & Liam Wagner & Suchi Misra & Ravindra Bagia, 2013. "Analysis of institutional adaptability to redress electricity infrastructure vulnerability due to climate change," Energy Economics and Management Group Working Papers, School of Economics, University of Queensland, Australia 6-2013, School of Economics, University of Queensland, Australia.
  7. Paul Eckerstorfer & Johannes Halak & Jakob Kapeller & Bernhard Schütz & Florian Springholz & Rafael Wildauer, 2014. "Correcting wealth survey data for the missing rich: The case of Austria," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2014-01, Department of Economics, Johannes Kepler University Linz, Austria.
  8. Herr, Hansjörg & Ruoff, Bea, 2014. "Wage dispersion : empirical developments, explanations, and reform options," ILO Working Papers, International Labour Organization 485325, International Labour Organization.
  9. Salvatore Morelli, 2014. "Banking Crises in the US: the Response of Top Income Shares in a Historical Perspective," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 359, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. European Commission, 2013. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2013 Report," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 38, Directorate General Taxation and Customs Union, European Commission.
  11. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper, University Library of Munich, Germany 55357, University Library of Munich, Germany.
  12. Marcin Kacperczyk & Jaromir B. Nosal & Luminita Stevens, 2014. "Investor Sophistication and Capital Income Inequality," NBER Working Papers, National Bureau of Economic Research, Inc 20246, National Bureau of Economic Research, Inc.
  13. Pirmin Fessler & Martin Schürz, 2013. "Cross-Country Comparability of the Eurosystem Household Finance and Consumption Survey," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 29–50.

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