Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income
Starting from the standard Gordon inflation model, which explains price changes by inertia, demand shocks, and supply shocks but excludes wages, the first part of this paper returns wages to the analysis by developing a model that includes both price and wage equations. The model allows for feedback between the two and captures the effect of changes in trend productivity growth on inflation, nominal wages, and labor’s income share. In dynamic simulations, changes in the productivity growth trend strongly boosted inflation during 1965-79 and slowed it between 1995 and 2005. The paper’s second part links the productivity growth analysis to changes in the income distribution. It finds, using IRS data, that only the top decile experienced real wage and salary income growth equal to or above average economywide productivity growth. And increasing inequality within the top decile was as important a source of growing inequality as the gap between the top and bottom deciles.
Volume (Year): 36 (2005)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: 1775 Massachusetts Ave NW, Washington DC 20036|
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
- repec:hrv:faseco:30703979 is not listed on IDEAS
- Daron Acemoglu, 2002.
"Cross-Country Inequality Trends,"
LIS Working papers
296, LIS Cross-National Data Center in Luxembourg.
- David Card & John E. DiNardo, 2002.
"Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles,"
Journal of Labor Economics,
University of Chicago Press, vol. 20(4), pages 733-783, October.
- David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
- Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
- Robert J. Gordon, 1975. "Alternative Responses of Policy to External Supply Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 183-206.
- Kopczuk, Wojciech & Saez, Emmanuel, 2004.
"Top Wealth Shares in the United States, 1916-2000: Evidence From Estate Tax Returns,"
National Tax Journal,
National Tax Association, vol. 57(2), pages 445-487, June.
- Wojciech Kopczuk & Emmanuel Saez, 2004. "Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns," NBER Working Papers 10399, National Bureau of Economic Research, Inc.
- Katharine Bradbury & Jane Katz, 2002. "Issues in economics: are lifetime incomes growing more unequal?: looking at new evidence on family income mobility," Regional Review, Federal Reserve Bank of Boston, issue Q 4, pages 2-5.
- Andrew Atkeson & Lee E. Ohanian, 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:36:y:2005:i:2005-2:p:67-150. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Ambrosino)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.