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

  • Campos-Vazquez, Raymundo M.
  • Chavez, Emmanuel
  • Esquivel, Gerardo

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://mpra.ub.uni-muenchen.de/52488/1/MPRA_paper_52488.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52488.

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Date of creation: Dec 2013
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Handle: RePEc:pra:mprapa:52488
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  1. 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.
  2. James M. Poterba, 1993. "Tax Policy and the Economy, Volume 7," NBER Books, National Bureau of Economic Research, Inc, number pote93-1, October.
  3. 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, October.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  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. Emmanuel Saez, 2000. "Using Elasticities to Derive Optimal Income Tax Rates," NBER Working Papers 7628, National Bureau of Economic Research, Inc.
  11. 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.
  12. 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.
  13. 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.
  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. Corak, Miles, 2013. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility," IZA Discussion Papers 7520, Institute for the Study of Labor (IZA).
  16. 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.
  17. 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.
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