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Top Incomes, Rising Inequality, and Welfare

Author

Listed:
  • Kevin J. Lansing

    (Federal Reserve Bank of San Francisco, and Norges Bank)

  • Agnieszka Markiewicz

    (Erasmus University Rotterdam)

Abstract

This paper develops a general-equilibrium model of skill-biased technological change that approximates the observed shifts in the shares of wage and non-wage income going to the top decile of U.S. households since 1980. Under realistic assumptions, we find that all agents can benefit from the technology change, provided that the observed rise in redistributive transfers over this period is taken into account. We show that the increase in capital’s share of total income and the presence of capital-entrepreneurial skill complementarity are two key features that help support the wages of ordinary workers as the new technology diffuses.

Suggested Citation

  • Kevin J. Lansing & Agnieszka Markiewicz, 2012. "Top Incomes, Rising Inequality, and Welfare," Tinbergen Institute Discussion Papers 12-114/IV, Tinbergen Institute, revised 28 Apr 2015.
    • Handle: RePEc:tin:wpaper:20120114
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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