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The Extreme Wealth-Income Ratio (EWIR): the Joker Smile Curve (JSC) and the New Age of Extremes

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  • Louis Chauvel

Abstract

Is it possible to observe explosive economic inequality, even if the Gini indices of income and of wealth remain stagnant? The answer is yes. The Extreme wealth-income ratio (EWIR), that compares the top quantiles of wealth accumulation to the median income level (among other similar variants), expresses the number (thousands) of years the richest fractions of the wealthy can buy of the average layperson’s income. This new indicator brings to light new inequalities that no traditional indicator detects. Building on the traditional wealth-income ratio (WIR, Stiglitz, 1969) and the Top Wealth-Income Ratio (TWIR) recently developed by Chauvel et al. (2021), a new generalization is here proposed to provide a better measurement of the extremization of socioeconomic inequalities based on developments at the top of society. The EWIR is applied to various examples: decades of British, French, and American trends, global data from the last 20 years, and comparisons with data from large-scale surveys (LWS, EU-HFCS, and PSID, among others). The EWIR confirms that the Gini indices of income and wealth are not sufficient measurements for identifying extreme social inequalities.

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  • Louis Chauvel, 2022. "The Extreme Wealth-Income Ratio (EWIR): the Joker Smile Curve (JSC) and the New Age of Extremes," LWS Working papers 39, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:lwswps:39
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-397, July.
    2. Jacob S. Hacker & Paul Pierson, 2010. "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States," Politics & Society, , vol. 38(2), pages 152-204, June.
    3. James B. Davies & Anthony F. Shorrocks, 2018. "Comparing global inequality of income and wealth," WIDER Working Paper Series wp-2018-160, World Institute for Development Economic Research (UNU-WIDER).
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