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Growth is (really) good for the (really) rich

  • Raymundo M. Campos-Vazquez

    ()

    (El Colegio de Mexico)

  • Emmanuel Chavez

    ()

    (Secretaría de Hacienda y Crédito Público)

  • Gerardo Esquivel

    ()

    (El Colegio de Mexico)

This paper analyzes the relationship between mean income and the income of the rich. Our methodology closely follows that of Dollar and Kraay (2002), but instead of looking at the bottom of the distribution, we analyze the top. We use panel data from the World Top Incomes database, which collects top income data from several countries using tax returns as the raw source. We define the “rich” as earners in the top 10 percent, 1 percent, 0.1 percent, and 0.01 percent of the income distribution. We find that economic growth is good for the rich in the sense that the mean income of the top decile of the distribution grows in the same proportion as that of the whole population. However, we also find that the income of earners in the top percentile of the distribution and above grows in an even larger proportion than average income: that is, economic growth is really good for the really rich. We also find that during economic downturns, the average income of top earners responds proportionally less to changes in mean income than during economic expansions. Our results are robust to different sample specifications.

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File URL: http://cee.colmex.mx/documentos/documentos-de-trabajo/2013/dt20139.pdf
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Paper provided by El Colegio de México, Centro de Estudios Económicos in its series Serie documentos de trabajo del Centro de Estudios Económicos with number 2013-09.

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Date of creation: Sep 2013
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Handle: RePEc:emx:ceedoc:2013-09
Contact details of provider: Web page: http://www.colmex.mx/centros/cee/

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  1. Stefanie Stantcheva & Emmanuel Saez & Thomas Piketty, 2012. "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities," 2012 Meeting Papers 78, Society for Economic Dynamics.
  2. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February.
  3. A.B. Atkinson & Andrew Leigh, 2006. "The Distribution of Top Incomes in Australia," CEPR Discussion Papers 514, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  4. James E. Foster & Miguel Székely, 2001. "Is Economic Growth Good for the Poor? Tracking Low Incomes Using General Means," Research Department Publications 4269, Inter-American Development Bank, Research Department.
  5. Malte Lübker & Graham Smith & John Weeks, 2002. "Growth and the poor: a comment on Dollar and Kraay," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 555-571.
  6. 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.
  7. James M. Poterba, 1993. "Tax Policy and the Economy, Volume 7," NBER Books, National Bureau of Economic Research, Inc, number pote93-1, May.
  8. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
  9. Simon Kuznets & Elizabeth Jenks, 1953. "Shares of Upper Income Groups in Income and Savings," NBER Books, National Bureau of Economic Research, Inc, number kuzn53-1, May.
  10. Thomas Piketty & Gabriel Zucman, 2014. "Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1255-1310.
  11. Richard V. Burkhauser & Markus H. Hahn & Roger Wilkins, 2013. "Measuring Top Incomes Using Tax Record Data: A Cautionary Tale from Australia," Melbourne Institute Working Paper Series wp2013n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  12. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," NBER Working Papers 11955, National Bureau of Economic Research, Inc.
  13. 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.
  14. Corak, Miles, 2013. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility," IZA Discussion Papers 7520, Institute for the Study of Labor (IZA).
  15. Austan Goolsbee, 1999. "Evidence on the High-Income Laffer Curve from Six Decades of Tax Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 1-64.
  16. 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.
  17. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 205-29, January.
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