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Do Rising Top Incomes Lift All Boats?

Author

Listed:
  • Andrews, Dan

    (Harvard University)

  • Jencks, Christopher

    (Harvard University)

  • Leigh, Andrew

    (Australian National University)

Abstract

Pooling data for 1905 to 2000, we find no systematic relationship between top income shares and economic growth in a panel of 12 developed nations observed for between 22 and 85 years. After 1960, however, a one percentage point rise in the top decile's income share is associated with a statistically significant 0.12 point rise in GDP growth during the following year. This relationship is not driven by changes in either educational attainment or top tax rates. If the increase in inequality is permanent, the increase in growth appears to be permanent, but it takes 13 years for the cumulative positive effect of faster growth on the mean income of the bottom nine deciles to offset the negative effect of reducing their share of total income.

Suggested Citation

  • Andrews, Dan & Jencks, Christopher & Leigh, Andrew, 2009. "Do Rising Top Incomes Lift All Boats?," Working Paper Series rwp09-018, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp09-018
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Do rising top incomes mean higher growth?
      by Economic Logician in Economic Logic on 2009-12-02 23:01:00
    2. Inequality – It’s Bad…And It’s About to Get Way Worse
      by The Institute in INET Blog on 2013-09-13 23:21:07
    3. Hur påverkar ökad ojämlikhet tillväxten?
      by nonicoclolasos in Nonicoclolasos on 2009-12-03 22:06:36
    4. Har Rosenberg rätt om jämlikhet?
      by nonicoclolasos in Nonicoclolasos on 2010-03-09 12:00:08

    Citations

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    Cited by:

    1. Peter Hoeller, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 4. Top Incomes," OECD Economics Department Working Papers 927, OECD Publishing.
    2. Dash, Bharatee Bhushan & Mukherjee, Sacchidananda, 2013. "Does Political Competition Influence Human Development? Evidence from the Indian States," Working Papers 13/118, National Institute of Public Finance and Policy.
    3. Elina Tuominen, 2024. "Top-end inequality and growth: empirical exploration of nonlinearities and the time dimension," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(2), pages 311-331, June.
    4. Risso, W. Adrián & Punzo, Lionello F. & Carrera, Edgar J. Sánchez, 2013. "Economic growth and income distribution in Mexico: A cointegration exercise," Economic Modelling, Elsevier, vol. 35(C), pages 708-714.
    5. Thompson Jeffrey P. & Leight Elias, 2012. "Do Rising Top Income Shares Affect the Incomes or Earnings of Low and Middle-Income Families?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-38, November.
    6. Michal Brzezinski, 2013. "Income Polarization and Economic Growth," LIS Working papers 587, LIS Cross-National Data Center in Luxembourg.
    7. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2009. "The long-run determinants of inequality: What can we learn from top income data?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 974-988, August.
    8. Tuominen Elina, 2016. "Changes or levels? Reassessment of the relationship between top-end inequality and growth," Working Papers 1609, Tampere University, Faculty of Management and Business, Economics.
    9. Raymundo M. Campos-Vazquez & Emmanuel Chavez & Gerardo Esquivel, 2017. "Growth is (really) good for the (really) rich," The World Economy, Wiley Blackwell, vol. 40(12), pages 2639-2675, December.
    10. Saha, Anjan K. & Mishra, Vinod, 2020. "Genetic distance, economic growth and top income shares: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 92(C), pages 37-47.
    11. Jordá, Vanesa & Niño-Zarazúa, Miguel, 2019. "Global inequality: How large is the effect of top incomes?," World Development, Elsevier, vol. 123(C), pages 1-1.
    12. Alessandro Pietropaoli, 2025. "Income distribution and growth in France: a long-run time-frequency analysis," Temi di discussione (Economic working papers) 1483, Bank of Italy, Economic Research and International Relations Area.
    13. Dierk Herzer, 2016. "Unions and Income Inequality," Economic Development Quarterly, , vol. 30(3), pages 267-274, August.
    14. Anjan K. Saha & Vinod Mishra & Russell Smyth, 2021. "Financial development and top income shares in OECD countries," Southern Economic Journal, John Wiley & Sons, vol. 87(3), pages 952-978, January.
    15. Josh Bivens & Lawrence Mishel, 2013. "The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 57-78, Summer.
    16. Burkhauser, Richard V. & De Neve, Jan-Emmanuel & Powdthavee, Nattavudh, 2016. "Top Incomes and Human Well-being Around the World," IZA Discussion Papers 9677, Institute of Labor Economics (IZA).
    17. Herzer, Dierk & Vollmer, Sebastian, 2013. "Rising top incomes do not raise the tide," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 504-519.
    18. Michael, Bryane & Hartwell, Christopher A. & Ho, Gary, 2013. "Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?," EconStor Preprints 109960, ZBW - Leibniz Information Centre for Economics.
    19. Cabral, René & García-Díaz, Rocío & Mollick, André Varella, 2016. "Does globalization affect top income inequality?," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 916-940.
    20. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, Tampere University, Faculty of Management and Business, Economics.
    21. Tony Ward, 2017. "Inequality and Growth: Reviewing the Economic and Social Impacts," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(1), pages 32-51, March.
    22. Jordá, Vanesa & Niño-Zarazúa, Miguel, 2019. "Global inequality: How large is the effect of top incomes?," World Development, Elsevier, vol. 123(C), pages 1-1.
    23. Santo Milasi, 2014. "Top Income Shares and Budget Deficits," Rivista di Politica Economica, SIPI Spa, issue 1, pages 383-406, January-M.
    24. Lane Kenworthy, 2010. "Rising Inequality, Public Policy, and America's Poor," Challenge, Taylor & Francis Journals, vol. 53(6), pages 93-109.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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