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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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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
Date of revision:
Handle: RePEc:emx:ceedoc:2013-09
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  1. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
  2. Piketty, Thomas & Saez, Emmanuel & Stantcheva, Stefanie, 2011. "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities," CEPR Discussion Papers 8675, C.E.P.R. Discussion Papers.
  3. 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.
  4. Dan Andrews & Christopher Jencks & Andrew Leigh, 2009. "Do Rising Top Incomes Lift All Boats?," CAMA Working Papers 2009-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. James M. Poterba, 1993. "Tax Policy and the Economy, Volume 7," NBER Books, National Bureau of Economic Research, Inc, number pote93-1, December.
  6. Piketty, Thomas & Zucman, Gabriel, 2013. "Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010," CEPR Discussion Papers 9588, C.E.P.R. Discussion Papers.
  7. Miles Corak, 2013. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 79-102, Summer.
  8. James E. Foster & Miguel Székely, 2001. "Is Economic Growth Good for the Poor?: Tracking Low Incomes Using General Means," IDB Publications (Working Papers) 6486, Inter-American Development Bank.
  9. 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.
  10. 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.
  11. Emmanuel Saez, 2000. "Using Elasticities to Derive Optimal Income Tax Rates," NBER Working Papers 7628, National Bureau of Economic Research, Inc.
  12. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," NBER Working Papers 19075, National Bureau of Economic Research, Inc.
  13. Simon Kuznets, 1950. "Shares of Upper Income Groups in Income and Savings," NBER Books, National Bureau of Economic Research, Inc, number kuzn50-1, December.
  14. Anthony B. Atkinson & Andrew Leigh, 2007. "The Distribution of Top Incomes in Australia," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 247-261, 09.
  15. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  16. 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.
  17. repec:tpr:qjecon:v:118:y:2003:i:1:p:1-39 is not listed on IDEAS
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