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The Top 1 Percent in International and Historical Perspective

  • Facundo Alvaredo
  • Anthony B. Atkinson
  • Thomas Piketty
  • Emmanuel Saez

The top 1 percent income share has more than doubled in the United States over the last thirty years, drawing much public attention in recent years. While other English speaking countries have also experienced sharp increases in the top 1 percent income share, many high‐income countries such as Japan, France, or Germany have seen much less increase in top income shares. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century experienced in virtually all high‐income countries. We highlight four main factors. The first is the impact of tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares. The effects of top rate cuts can operate in conjunction with other mechanisms. The second factor is indeed a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Indeed, top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment. The third factor is capital income. Overall, private wealth (relative to income) has followed a U-shaped path over time, particularly in Europe, where inherited wealth is, in Europe if not in the United States, making a return. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19075.

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Date of creation: May 2013
Date of revision:
Publication status: published as 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.
Handle: RePEc:nbr:nberwo:19075
Note: PE
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  1. 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.
  2. Wojciech Kopczuk & Emmanuel Saez, 2004. "Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns," NBER Working Papers 10399, National Bureau of Economic Research, Inc.
  3. Thomas Piketty, 2011. "On the Long-Run Evolution of Inheritance: France 1820--2050," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1071-1131.
  4. Atkinson, A B, 2008. "The Changing Distribution of Earnings in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199532438.
  5. Martin Feldstein, 1993. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act," NBER Working Papers 4496, National Bureau of Economic Research, Inc.
  6. 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.
  7. Henrik Jacobsen Kleven & Camille Landais & Esben Schultz, 2014. "Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 333-378.
  8. Edward N. Wolff & Maury Gittleman, 2011. "Inheritances and the Distribution of Wealth Or Whatever Happened to the Great Inheritance Boom?," BCL working papers 55, Central Bank of Luxembourg.
  9. Christoph Schinke, 2012. "Inheritance in Germany 1911 to 2009: A Mortality Multiplier Approach," SOEPpapers on Multidisciplinary Panel Data Research 462, DIW Berlin, The German Socio-Economic Panel (SOEP).
  10. Peter Diamond & Emmanuel Saez, 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 165-90, Fall.
  11. 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.
  12. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
  13. repec:oup:qjecon:v:129:y:2013:i:1:p:333-378 is not listed on IDEAS
  14. Anthony B. Atkinson, 2012. "The Mirrlees Review and the State of Public Economics," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 770-80, September.
  15. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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