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

Listed author(s):
  • 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
Handle: RePEc:emx:ceedoc:2013-09
Contact details of provider: Web page: http://www.colmex.mx/centros/cee/

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  1. 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.
  2. 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.
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  10. 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.
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  12. James M. Poterba, 1993. "Tax Policy and the Economy, Volume 7," NBER Books, National Bureau of Economic Research, Inc, number pote93-1, April.
  13. 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.
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  16. Richard V. Burkhauser & Markus H. Hahn & Roger Wilkins, 2013. "Measuring Top Incomes Using Tax Record Data: A Cautionary Tale from Australia," NBER Working Papers 19121, National Bureau of Economic Research, Inc.
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