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The evolution of wealth inequality over half a century: The role of taxes, transfers and technology

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  • Kaymak, Barış
  • Poschke, Markus

Abstract

Over the last 50 years the U.S. tax system went through a striking transformation that reduced the effective tax rates for top income groups and raised transfers to seniors. This paper investigates the macroeconomic repercussions of this change in policy, particularly for the distributions of income, wealth and consumption. Changes in taxes and transfers account for nearly half of the rise in wealth concentration. Nonetheless, their impact on the distributions of income and consumption has been minor due to changes in equilibrium prices and the offsetting effects of tax cuts and transfers on the dispersion of consumption. Results highlight the role of increasing wage dispersion during this period as the main driver of trends in inequality.

Suggested Citation

  • Kaymak, Barış & Poschke, Markus, 2016. "The evolution of wealth inequality over half a century: The role of taxes, transfers and technology," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 1-25.
  • Handle: RePEc:eee:moneco:v:77:y:2016:i:c:p:1-25
    DOI: 10.1016/j.jmoneco.2015.10.004
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