global inequality how large is the effect of top incomes abstract despite the growing interest in global inequality assessing inequality trends is a major challenge because individual data on income or consumption is not often available nevertheless the periodic release of certain summary statistics of the income distribution has become increasingly common hence grouped data in form of income shares have been conventionally used to construct inequality trends based on lower bound approximations of inequality measures this approach introduces two potential sources of measurement error first these estimates are constructed under the assumption of equality of incomes within income shares second the highest income earners are not included in the household surveys from which grouped data is obtained in this paper we propose to deploy a flexible parametric model which addresses these two issues in order to obtain a reliable representation of the income distribution and accurate estimates of inequality measures this methodology is used to estimate the recent evolution of global interpersonal inequality from 1990 to 2015 and to examine the effect of survey under coverage of top incomes on the level and direction of global inequality overall we find that item non response at the top of the distribution substantially biases global inequality estimates but more importantly it might also affect the direction of the trends

income inequality in france 1901 1998 this paper uses data from income tax returns 1915 98 wage tax returns 1919 98 and inheritance tax returns 1902 94 in order to compute homogeneous yearly estimates of income wage and wealth inequality for twentieth century france the main conclusion is that the decline in income inequality that took place during the first half of the century was mostly accidental in france and possibly in a number of other countries as well wage inequality has been extremely stable in the long run and the secular decline in income inequality is for the most part a capital income phenomenon holders of large fortunes were badly hurt by major shocks during the 1914 45 period and they were never able to fully recover from these shocks probably because of the dynamic effects of progressive taxation on capital accumulation and pretax income inequality

top income shares in the long run an overview this paper offers an overview of what we have learned from a collective research project on income distribution in the long run using historical income tax statistics and a common methodology we have constructed annual top income shares series often broken down by income source for over 20 countries covering most of the 20th century one important con clusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental and does not seem to have much to do with a kuznets type process top capital incomes were hit by major shocks during the 1914 1945 period and were never able to fully recover from these shocks probably because of the dynamic impact of pro gressive income and estate taxation our database also allows us to readdress the cross country analysis of the interplay between inequality and growth with better prospects than with standard databases jel d31

how groups reach agreement in risky choices an experiment this paper studies how groups resolve disagreement when they must reach unanimity after submitting individual proposals and exchanging text form messages via a chat window in lottery choice experiments we find that the majority proposal does not always prevail the minority proposal prevails sometimes especially when it is closer to risk neutrality about one third of the groups disagrees after communication and would have got zero payoffs if disagreement remains after two more attempts without communication in these groups extrovert subjects are more likely to lead the group outcome than confused or conscientious subjects overall group choices are more coherent and closer to risk neutrality than individuals checking the recorded messages we find that the chat activity is intense growing with the level of disagreement and aims at finding consensus the amount and timing of chat messages help us to predict which choice prevails in the group

inefficiencies from metropolitan political and fiscal decentralization failures of tiebout competition we examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi community model with mobile and heterogeneous households and with flexible housing supplies we characterize the first best allocation and show efficiency can be implemented with decentralization using head taxes we calibrate the model and compare welfare in property tax equilibria both decentralized and centralized to the efficient allocation inefficiencies with decentralization and property taxation are large dissipating most if not all the potential welfare gains that efficient decentralization could achieve in property tax equilibrium centralization is frequently more efficient an externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes copyright oxford university press

media bias and influence evidence from newspaper endorsements this paper investigates the relationship between media bias and the inuence of the media on voting in the context of newspaper endorsements werst develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources newspapers are potentially biased in favor of one of the candidates and voters thus rationally ac count for the credibility of any endorsements our primary empiricalnding is that endorsements are inuential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement the degree of this inuence however depends upon the credibility of the endorsement in this way endorsements for the democratic candidate from left leaning news papers are less inuential than are endorsements from neutral or right leaning or newspapers and likewise for endorsements for the republican thesendings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias

moderation in groups evidence from betting on ice break ups in alaska we use a large sample of guessed ice break up dates for the tanana river in alaska to study differences between outcomes of decisions made by individuals versus groups we estimate the distribution of guesses conditional on whether they were made by individual bettors or betting pools we document two major distinctions between the two sets of guesses 1 the distribution of guesses made by groups of bettors appears to conform more to the distribution of historical break up dates than the distribution of guesses made by individual bettors and 2 the distribution for groups has less mass in its tails and displays lower variability than the distribution for individuals we argue that these two pieces of evidence are consistent with the hypothesis that group decisions are more moderate either because groups have to reach a compromise when their members disagree or because individuals with extreme opinions are less likely to be part of a group

multidimensional affluence theory and applications to germany and the us this article suggests multidimensional affluence measures for the top of the distribution in contrast to commonly used top income shares they allow the analysis of the extent intensity and breadth of affluence in several dimensions within a common framework we illustrate this by analysing the role of income and wealth as dimensions of multidimensional well being in germany and the us in 2007 as well as for the us over the period 1989 2007 we find distinct country differences with the country ranking depending on the measure while in germany wealth predominantly contributes to the intensity of affluence income is more important in the us

teams take the better risk abstract one reason why decision makers are often teams and not individuals may be that team decisions comply more closely with economic rationality we compare individual and team decisions when systematic deviations from the expected utility theory eut and the portfolio selection theory pst are to be expected we find almost no evidence for the greater compliance of team decisions with the principles of eut however there is substantial evidence for the consistency of team decisions with the pst compared to individuals teams accumulate significantly more expected value at a significantly lower total risk measured in standard deviation s d

life expectancy and human capital investments evidence from maternal mortality declines longer life expectancy should encourage human capital accumulation since a longer time horizon increases the value of investments that pay out over time previous work has been unable to determine the empirical importance of this life expectancy effect due to the difficulty of isolating it from other effects of health on education we examine a sudden drop in maternal mortality risk in sri lanka between 1946 and 1953 which creates a sharp increase in life expectancy for school age girls without contemporaneous effects on health and which also allows for the use of boys as a control group using additional geographic variation we find that the 70 reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4 1 female literacy by 2 5 and female years of education by 4 0 authors

intergroup conflict and intra group punishment in an experimental contest game we study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other our main motivation stems from the analysis of socio political conflict the relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not we find first that our results contradict the independence of groupsize prediction conflict expenditures of groups are substantially larger than those of individuals and both are substantially above equilibrium towards the end of the experiment material losses in groups are 257 of the predicted level there is however substantial heterogeneity in the investment behaviour of individual group members second allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures now material losses are 869 of the equilibrium level and there is much less heterogeneity in individual group members investments these results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs

are you risk averse over other people s money decisions with uncertain outcomes are often made by one party in settings where another party bears the consequences whenever an individual is delegated to make decisions that affect others such as in the typical corporate structure does the individual make decisions that reflect the risk preferences of the party bearing the consequences we examine this question in two simple settings lottery choices and sealed bid auctions using controlled laboratory experiments we find that when an individual makes a decision for an anonymous stranger there is a tendency to exhibit less risk aversion this reduction in risk aversion is relative to his or her own preferences and it is also relative to his or her belief about the preferences of others this result has significant implications for the design of contracts between principals and agents

top incomes in sweden over three quarters of a century a micro data approach this paper aims to throw light on the development of top incomes in sweden as well as the causes for change using household income data we show that since the first half of the 1980s real income at the top of the distribution has developed more favourably than for other groups this contrasts with the changes which occurred prior to the 1980s reasons for the rise in the top income share are several the development of stock prices tax reforms and the labour market change of top wages increasing more rapidly than others

do political parties matter evidence from u s cities are cities as politically polarized as states and countries no is the answer from our regression discontinuity design analysis which shows that whether the mayor is a democrat or a republican does not affect the size of city government the allocation of local public spending or crime rates however there is a substantial incumbent effect for mayors we investigate three mechanisms that could account for the striking lack of partisan impact at the local level and find the most support for tiebout competition among localities within metropolitan areas

group and individual risk preferences a lottery choice experiment with self employed and salaried workers abstract this paper focuses on decision making under risk comparing group and individual risk preferences in a lottery choice experiment in the individual treatment subjects make choices individually in the group treatment each subject placed in a group made lottery choice via voting in the choice treatment subjects choose whether to be on their own or in a group the originality of this research lies in the fact that we introduced variability in socio demographic characteristics by recruiting salaried and self employed workers our main findings indicate that groups are more likely than individuals to choose safe lotteries our results also show that individuals risk attitude is correlated with both the type and the sector of employment

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

comparing the distribution of top incomes across countries comparing the distribution of top incomes across countries raises many methodological problems including differences in tax legislation and in tax avoidance the definition of the income unit and the definition of a control total for income the paper considers the significance of these problems in three applications comparing top income shares at a point in time analysing the extent of convergence or divergence over time and setting national changes in the context of the world distribution of income jel d31

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

are two heads better than one monetary policy by committee two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals one of these experiments imitates real life monetary policy decisions in both cases the hypothesis is found wanting groups are not slower than individuals in both experiments we also find that group decisions are on average better than individual decisions this holds regardless of whether the groups make decisions by unanimity or majority rule simple mechanical theories of group decisionmaking that the group follows its average player median player or best player do not explain the results group interactions seem to matter

experimental tests of the separation theorem and the capital asset pricing model a computer controlled multistage portfolio selection task was devised to test experimentally basic assumptions underlying the separation theorem and the capital asset pricing model although most of the subjects diversified among the three risky assets the introduction of a riskless asset did not have the effect predicted by the separation theorem nor were the subjects affected by systematic changes in the variance covariance matrix of the risky returns however performance improved as the reward was increased tenfold the capital asset pricing model capm proposed by william sharpe 1964 john lintner 1965 and jan mossin 1966 has been the predominant normative as well as positive theory for determining assets returns and prices in financial markets the capm has a wide range of implications for various financial issues including the allocation of risky assets price predictions performance indices and market efficiency tests as well as tools for corporate finance decisions such as capital structure costs of financial sources and prices of new issues during the last decade numerous theoretical studies have examined and extended the capm a most recent development is the

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

are teams prone to myopic loss aversion an experimental study on individual versus team investment behavior abstract myopic loss aversion mla has been found to have a persistent influence on individual decision making under risk in this paper i show that team decision making attenuates mla but that teams are also prone to mla

who follows the crowd groups or individuals abstract in games of social learning individuals tend to give too much weight to their own private information relative to the information that is conveyed by the choices of others weizsacker 2010 in this paper we investigate differences between individuals and small groups as decision makers in information cascade situations in line with results from social psychology as well as results on bayesian decision making charness et al 2006 we find that groups behave more rationally than individuals groups in particular are able to abandon their own private signals more often than individuals when it is rational to do so our results indicate that the intellective part of the decision task contributes slightly more to the superior performance of groups than the judgmental part our findings have potential implications for the design of decision making processes in organisations finance and other economic settings

the evolution of top incomes in an egalitarian society sweden 1903 2004 this study presents new homogenous series of top income shares in sweden over the period 1903 2004 we find that starting from levels of inequality approximately equal to those in other western countries at the time the income share of the swedish top decile drops sharply over the first eighty years of the twentieth century most of the decrease takes place before the expansion of the welfare state and by 1950 swedish top income shares were already lower than in other countries the fall is almost entirely due to a dramatic drop in the top percentile explained mostly by decreases in capital income while the lower half of the top decile consisting mainly of wage earners experiences virtually no change over this period in the past decades top income shares evolve very differently depending on whether capital gains are included or not when included sweden s experience resembles that in the u s and the u k with sharp increases in top incomes excluding capital gains sweden looks more like the continental european countries where top income shares have remained relatively constant a possible interpretation of our results is that sweden over the past 20 years has become a country where it is more important to make the right financial investments than to earn a lot to become rich

the tragedy of the commons revisited the importance of group decision making we use a laboratory experiment to compare the way groups and individuals behave in an inter temporal common pool dilemma the experimental design distinguishes between a non strategic problem where players individuals or groups of three make decisions without interaction and a strategic part where players harvest from a common pool this allows us to correct for differences between individuals and groups in the quality of decisions when testing for differences in competitiveness group decisions are either made by majority rule or unanimity the results show that groups are less myopic than individuals i e they make qualitatively better decisions but that they are more competitive than individuals when placed in a strategic setting the net result for groups deciding by majority rule is that they make less efficient decisions in the strategic game than individuals do we are able to show that this is caused by the median voter departing from her original preference in early periods with a shrinking pool when groups have to make unanimous decisions they start playing the strategic game more efficiently then individuals do but they rapidly become more competitive with repetition of the game

the impact of unions on municipal elections and urban fiscal policies abstract the efficient decentralized provision of public goods requires that special interest groups such as municipal unions do not exercise undue influence on the outcome of municipal elections and local fiscal policies we develop a new political economy model in which a union can endorse one of the candidates in a local election a politician that prefers an inefficiently large public sector can therefore win an election if the union can provide sufficiently strong support during the campaign we have assembled a unique data set that is based on union endorsements that are published in leading local newspapers our empirical analysis focuses on municipal elections in the 150 largest cities in the u s between 1990 and 2012 we find that challengers strongly benefit from endorsements in competitive elections challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies

the voting behavior of bureaucrats some empirical evidence this paper has examined the voting behavior of bureaucrats and the consequences for elections the economic theory of the rational voter predicts that bureaucrats would have more to gain by voting than the general public the cost of voting is lower for public employees than for those who work in the private sector as a consequence theory predicts that bureaucrats would participate in elections at a greater rate than other individuals as a test of the validity of the economic theory of voting an empirical analysis of national elections from 1964 to 1978 was presented the evidence is drawn from household survey data published by the u s bureau of the census the data permit a direct observation of voting participation rates of public and private employees the empirical results indicate that bureaucrats consistently participate in elections at significantly greater rates than non bureaucrats as the public sector expands and voter participation rates remain low bureaucrats will exert disproportionate influence on election outcomes

risk preference differentials of small groups and individuals the risk prefer ences of thr ee person group s a nd individuals are compar ed using a non sequential repeated measures lottery exp eriment w ith 20 per player win pe rcentages varying from 10 to 90 analysis based on independent samples of certainty equivalent ratios certainty equivalent expected value elicited using a maximum willingness to pay mechanism for fifty two individuals and sixteen groups reveals that 1 certainty equi valent ratios cers va ry significantly a cross lottery win percentages 2 cer dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries 3 for the highest risk lotteries the average cers submitted by groups are significantly smaller more risk averse than the average cers submitted by individuals 4 for the lowest risk lotteries the average cers submitted by groups are approximately risk neutral cer 1 and somewhat larger than the average cers submitted by individuals

top incomes in the netherlands and the united kingdom over the 20th century a method is developed for using income tax data to investigate the evolution of the highest incomes over virtually the entire 20th century the income shares of the top 10 5 1 0 5 0 1 and 0 05 percent are analysed for the uk and the netherlands for considering the top shares among themselves the pareto lorenz coefficient is proposed between the two countries the top shares appear to undergo a strikingly similar and strong decline up to the mid 1970s since then british top shares have increased significantly while dutch shares remained basically unchanged this outcome parallels similar results for the us and france obtained by piketty and saez and poses interesting questions for research jel n34 d31 o15

risk sharing and group decision making in a decision making problem where a group will receive an uncertain payoff which must be divided among the members of the group the ultimate payoff of interest is the vector of individual payoffs received by the members of the group in this paper preferences are quantified in terms of cardinal utility functions for such vectors of payoffs these utility functions can represent preferences concerning equitable and inequitable vectors of payoffs as well as attitudes toward risk the individual utility functions are aggregated to form a group utility function for the vector of payoffs and this latter function is in turn used to generate a group utility function for the overall group payoff and a sharing rule for dividing the group payoff into individual payoffs the resulting group decisions are pareto optimal in utility space properties of the sharing rule and the group utility function are investigated for additive and multilinear group utility functions

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0