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

an analysis of the true notional bond system applied to the cbot t bond futures abstract the conversion factor system cfs is used in the determination of the invoice price of the chicago board of trade treasury bond futures as an alternative to the cfs oviedo oviedo r a 2006 improving the design of treasury bond futures contracts the journal of business 79 1293 1315 proposed the true notional bond system tnbs and showed that it outperforms the cfs when interest rates are deterministic the main purpose of this paper is to compare the effectiveness of the two systems in a stochastic environment in order to do so we price the cbot t bond futures as well as all its embedded delivery options under both the cfs and the tnbs our pricing procedure is an adaptation of the dynamic programming algorithm described in ben abdallah et al ben abdallah r ben ameur h breton m 2007 pricing cbot treasury bond futures les cahiers du gerad g 2006 77 numerical illustrations show that in a stochastic framework tnbs does not always outperform the cfs however as the long term mean moves away from the level of the notional rate the tnbs performs increasingly better than the cfs

challenges in the portuguese textile and clothing industry a fight for survival abstractthe portuguese textile and clothing industry thrived after 1960 when portugal joined the european free trade association and it has been an important industry in portugal in terms of valu

the evolution of high incomes in northern america lessons from canadian evidence this paper uses tax statistics to construct new series on canadian top income shares from 1920 to 2000 and provides a systematic comparison with the u s experience as in the united states top income shares in canada display a ushaped pattern over the century with a precipitous drop during world war ii followed by a slower decline until 1970 since the late 1970s top income shares have been increasing dramatically and the very top shares are now as high as in the pre war era as in the united states the recent increase in top income shares is the consequence of a surge in top wages and salaries the canadian experience since the late 1970s does not appear to be well explained by tax changes suggesting that the upward trend in canada derives from the united states perhaps because many high income canadians have an emigration option this in turn suggests that the recent increase in u s personal income top shares is not merely a change in tax reporting behavior the recent sharp increase in top income shares in canada is of the same magnitude at the individual and family level and is not due to an increase in income mobility

cost relationships and globalization in the australian clothing industry abstractaustralia developed a substantial clothing industry with protectionist international trade policies including prohibitively high tariffs quotas and subsidies the industry became an important source of jobs with over 6 5 per cent of total manufacturing employment at the close of the 1960s as australia has moved towards freer trade employment in clothing production has fallen substantially the question of whether the clothing industry can remain viable in its new environment became an important issue here we examine two crucial economic considerations relating to that question economies of scale and relations substitute complementary between the various inputs both domestic and outsourced foreign the findings strongly indicate the presence of economies of scale and that the industry has reduced its unit costs over the period of study the results also suggest that most of the inputs are substitutes for one another although only the estimated cross price elasticities between capital a

implicit delivery options and optimal delivery strategies for financial futures contracts abstract futures contract specification usually allow the short position some variation as to when where how much and what is to be delivered in this paper we derive the optimal delivery policy for the treasury bond futures contracts and find that our policy produces profits that are positive and statistically significant this indicates that future prices are too high in that the short position can earn profits by skillfully exercising his delivery options we find the actual delivery policies of market participants depart substantially from the optimal strategy the implications of these findings for futures traders and bond dealers are discussed

the role of farmers behavioral attitudes and heterogeneity in futures contracts usage the relationship between farmers behavioral attitudes and use of futures contracts is examined taking into account non directly observable variables and the heterogeneity of farmers the relationships are tested on a stratified data sample of 440 farmers cluster analysis and covariance structure equation models are used to validate the relationships farmers are found not to be homogenous regarding the factors influencing their use of futures heterogeneity at the segment level masked important effects at the aggregate level notably risk attitude furthermore several psychological constructs for farmers related to market orientation risk exposure market performance and entrepreneurial behavior play important roles in their use of futures contracts

the long run determinants of inequality what can we learn from top income data this paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century we focus on three groups of income earners the rich p99 100

empirical studies of financial innovation lots of talk little action this paper reviews the extant empirical studies of financial innovation adopting broad criteria we could find only somewhat more than two dozen studies and since some financial innovations are examined by more than one study they cover only seventeen phenomena especially striking is the fact that only two studies offer tests of the broad hypotheses concerning the environmental conditions spurring financial innovation e g regulation taxes unstable macroeconomic conditions and ripe technologies that have been advanced in descriptive articles we offer some tentative conjectures as to why empirical studies of financial innovation are comparatively rare among our suggested culprits is an absence of accessible data we urge financial regulators to undertake more surveys of financial innovation and to make the survey data more available to researchers

earnings inequality and mobility in the united states evidence from social security data since 1937 this paper uses social security administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the united states annual earnings inequality is u shaped decreasing sharply up to 1953 and increasing steadily afterward short term earnings mobility measures are stable over the full period except for a temporary surge during world war ii virtually all of the increase in the variance in annual log earnings since 1970 is due to increase in the variance of permanent earnings as opposed to transitory earnings mobility at the top of the earnings distribution is stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s long term mobility among all workers has increased since the 1950s but has slightly declined among men the decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long term mobility among all workers

wage inequality and firm growth we discuss firm level evidence based on uk data showing that within firm pay inequality wage differentials between top and bottom level jobs increases with firm size moreover within firm pay inequality rises as firms grow larger over time lastly using wage data from 15 developed countries we document a positive association between aggregate wage inequality at the country level and growth by the largest firms in the country we conclude that part of what may be perceived as a global trend toward more wage inequality may be driven by an increase in the size of the largest firms in the economy

optimal innovation of futures contracts this article presents a simple model of the innovation of new futures contracts by transaction volume maximizing futures exchanges in incomplete markets under uncertainty with mean variance preferences and proportional transactions costs we characterize the set of nash equilibria for a number of exchanges simultaneously or sequentially choosing contracts the optimal monopolistic contract design is shown to be pareto optimal an example shows the failure of pareto optimality for aparticularnash equilibrium likewise in a monopolistic multiperiod setting an example shows the failure of pareto optimality given an incentive for the exchange to induce turnover

introducing new futures contracts reinforcement versus cannibalism abstract in order to assure survival futures exchanges around the world are in constant search of new futures contracts that will generate a profitable level of trading volume introducing new futures contracts may increase or decrease the volume for those contracts already listed using a multi product hedging model in which the perspective has been shifted from portfolio to exchange management we study these effects using data from two exchanges that differ regarding assets traded and market liquidity amsterdam exchanges versus chicago board of trade we show the usefulness of the proposed method the method may also be used to evaluate the benefits for exchanges that plan to internationalize their activities by merging with another exchange or by cross listing other exchanges futures contracts

why there are organized futures markets i shall present an explanation of the existence of organized futures markets with more predictive power than the two prevailing rival views my explanation briefly is this an organized futures market facilitates trade among strangers one of the rival prevailing views is a defense of futures trading it asserts that an organized futures market furnishes legitimate businessmen with a means of hedging so that they can obtain insurance against price risk the other prevailing view is an attack on organized futures markets it asserts that such markets enable speculators to manipulate prices to the detriment of outsiders who are less well informed and to the detriment of legitimate businessmen such as farmers the attack on organized futures markets likens them to gambling casinos the defense sees them as a form of insurance neither the attack nor the defense is valid the correct explanation is closely related to why we conduct trade using money instead of by barter

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

the significance of the market portfolio the market portfolio is in one sense the least important portfolio to provide to investors in an j agent one period stochastic endowment economy where preferences are quadratic a social welfare minded contract designer would never create a contract that would allow trading the market portfolio even the complete set of contracts all j 1 of them which achieve a first best solution never span the market portfolio these conclusions rely on the assumption that the contract designer has perfect information about agents utilities we also show that as the contract designer s information about agents utilities becomes more imperfect the optimal contracts approach contracts that weight individual endowments in proportion to elements of eigenvectors of the variance matrix of endowments then if there is a strong enough market component to endowments a portfolio approximating the market portfolio may be the most important portfolio

the korean textile industry still competitive after all these years although a vital part of the economy the korean textile industry has been challenged by the recent reduction of international trade barriers particularly as this industry was fully integrated into general agreement on tariffs and trade gatt in 2005 the textile industries in japan and many other countries have also faced difficulties this study examines future prospects for the korean industry by investigating the presence of economies of scale and relationships among the inputs of domestic capital labour and intermediate goods as well as foreign intermediate goods the findings are consistent with constant returns to scale and a substitutes relationship among all input pairs except for domestic capital and foreign intermediate goods thus there appear to be no further cost reductions available through increased output and economies of scale however some reduction in industry output may not result in increased unit costs either a reduction in the price of foreign intermediate goods will not onl

inequality in indonesia what can we learn from top incomes abstract using taxation and household survey data this paper estimates top income shares for indonesia during 1920 2004 our results suggest that top income shares grew during the 1920s and 1930s but fell in the post war era we observe a sharp rise in top income shares during the late 1990s coinciding with the 1997 98 economic crisis where comparable data are available top income shares in indonesia are generally higher than in other countries a finding that is at odds with the view that indonesia is a relatively egalitarian society this suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective

unraveling the mne wage premium whereas ib has extensively studied mnes generic positive impact on host economies but rarely on employee wages economics research has only shown an overall mne wage premium we unravel this premium considering multiple levels of analysis and accounting for host country contextual contingencies to unveil mnes different positive or negative distributional effects using unique micro level data from over 40 000 employees in 13 countries we examine mnes distributional effects for employees gender experience and immigrant status the influence of host country property rights protection and labor regulation and interplays with region and industry effects mnes distributional effects show marked differences that largely depend on the host country context and that are positive for experienced and foreign born employees in developed countries but negative for females working in developing countries whereas in developed countries the gender wage gap is smaller in mnes than in domestic firms as hypothesized we find evidence of a larger wage gap in developing countries the analysis also reveals that the higher host countries level of property rights protection the lower the mne wage premium our study points at the need to reassess statements about the generic positive impact of mnes in host countries particularly in developing countries and discusses further research implications

top indian incomes 1922 2000 this article presents data on the evolution of top incomes and wages for 1922 2000 in india using individual tax return data the data show that the shares of the top 0 01 percent 0 1 percent and 1 percent in total income shrank substantially from the 1950s to the early to mid 1980s but then rose again so that today these shares are only slightly below what they were in the 1920s and 1930s this u shaped pattern is broadly consistent with the evolution of economic policy in india from the 1950s to the early to mid 1980s was a period of socialist policies in india whereas the subsequent period starting with the rise of rajiv gandhi saw a gradual shift toward more pro business policies although the initial share of the top income group was small the fact that the rich were getting richer had a nontrivial impact on the overall income distribution although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in national sample survey based data and the national accounts based data it is sufficiently large to explain a non negligible part of it

productivity returns to scale and the elasticity of factor substitution in the usa apparel industry abstract in light of the growing trade deficit and unemployment in the us apparel industry we estimate the industry s productivity and efficiency for the period 1976 93 utilizing a variable elasticity of factor substitution production function the results indicate industry adjustment by increasing labor productivity and maintaining fairly stable profits despite job losses performance thus far does not justify additional protectionist trade policy however due to evidence of rapidly decreasing capital productivity substantial technological improvements will be necessary with an elasticity of factor substitution less than one and decreasing an increase in factor prices could result in higher apparel prices and preference for cheaper imports competition in the industry could be intensified by recent rules of the wto to liberalize trade in apparel

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

within firm pay inequality financial regulators and investors have expressed concerns about high pay inequality within firms using a proprietary data set of public and private firms this paper shows that firms with higher pay inequality relative wage differentials between top and bottom level jobs are larger and have higher valuations and stronger operating performance moreover firms with higher pay inequality exhibit larger equity returns and greater earnings surprises suggesting that pay inequality is not fully priced by the market our results support the notion that differences in pay inequality across firms are a reflection of differences in managerial talent received march 14 2016 editorial decision january 21 2017 by editor itay goldstein

the quality delivery option in treasury bond futures contracts this paper uses three methods to estimate quality option values for cbot treasury bond futures contracts it presents evidence regarding 1 payoffs from exercising this option at delivery 2 estimates from a t bond futures pricing model that incorporates this option and 3 estimates obtained from an exchange option pricing formula the results indicate that this option is worth considerably less than reported by kane and marcus 1986a for example payoffs obtained by switching from the bond cheapest to deliver three months prior to delivery to the one cheapest at time of delivery average less than 0 30 percentage points of par

firming up inequality earnings inequality in the united states has increased rapidly over the last three decades but little is known about the role of firms in this trend for example how much of the rise in earnings inequality can be attributed to rising dispersion between firms in the average wages they pay and how much is due to rising wage dispersion among workers within firms similarly how did rising inequality affect the wage earnings of different types of workers working for the same employer men vs women young vs old new hires vs senior employees and so on to address questions like these we begin by constructing a matched employer employee data set for the united states using administrative records covering all u s firms between 1978 to 2012 we show that virtually all of the rise in earnings dispersion between workers is accounted for by increasing dispersion in average wages paid by the employers of these individuals in contrast pay differences within employers have remained virtually unchanged a finding that is robust across industries geographical regions and firm size groups furthermore the wage gap between the most highly paid employees within these firms ceos and high level executives and the average employee has increased only by a small amount refuting oft made claims that such widening gaps account for a large fraction of rising inequality in the population

financial innovation the last twenty years and the next the word revolution is entirely appropriate for describing the changes in financial institu tions and instruments that have occurred in the past twenty years the major impulses to successful financial innovations have come from regulations and taxes the outlook for the future is for a slowing down of the rate of financial innovation but much growth and improvement are still in prospect

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

wealth concentration in a developing economy paris and france 1807 1994 using large samples of estate tax returns we construct new series on wealth concentration in paris and france from 1807 to 1994 inequality increased until 1914 because industrial and financial estates grew dramatically then adverse shocks rather than a kuznets type process led to a massive decline in inequality the very high wealth concentration prior to 1914 benefited retired individuals living off capital income rentiers rather than entrepreneurs the very rich were in their seventies and eighties whereas they had been in their fifties a half century earlier and would be so again after world war ii our results shed new light on ongoing debates about wealth inequality and growth

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

institutions partisanship and inequality in the long run it has been widely suggested by political scientists and economists based on empirical evidence for the period since 1970 that the institution of centralized wage bargaining and the presence of a government of the left are associated with lower levels of income inequality the authors make use of new data on top income shares as well as long run series on wage inequality to examine the effects of partisanship and wage bargaining over a much longer time period nearly the entire twentieth century their empirical results provide little support for the idea that either of these two factors is correlated with income inequality over this period they then show that a closer look at the introduction of centralized wage bargaining in individual countries during the middle part of the twentieth century reveals that in countries that moved to centralize wage bargaining income inequality had already been trending downward well before the institutional change that the move to centralized bargaining did not alter this trend and that these changes in income inequality were also observed in countries that did not adopt centralized wage bargaining at this time the results suggest that there were alternative institutional paths to reduced income inequality during most of the twentieth century this raises the possibility that either structural economic changes or commonly shared economic and political events such as world wars and economic crises may ultimately be more important for understanding the evolution of income inequality than are the institutional or partisan characteristics commonly considered to be decisive by political scientists

difference systems in financial futures markets many financial futures markets allow substitutions for the par grade of security at delivery substitutes are deliverable at premiums or discounts differences in commodities parlance to the futures price the rule that establishes these differences is called a difference system this paper characterizes financial futures market equilibrium with yield based difference systems and investigates particular systems in use the major finding is that currently used difference systems effectively limit deliverable supply in the futures markets and lead to futures prices which understate the cash market price of the par security in order to increase deliverable supply many financial futures markets allow the delivery of a variety of grades issues of securities in fulfillment of a financial futures contract the par grade of security on which the futures contract is based is deliverable at the futures price various other grades of securities are deliverable at premiums or discounts to the futures price in commodities parlance these premiums and discounts are called differences and the rule that establishes the set of premiums and discounts is called a difference system see hoffman 2 chapter xv for an excellent discussion of difference systems in commodity futures contracts there are two types of difference systems currently in use in financial futures markets both are based on security yields the first is called variable rate or yield maintenance pricing under this system nonpar securities are deliverable at the futures price times a factor which is the price of the delivered security relative to the par security where both are discounted by the yield of the par security selling at the futures price the second is called fixed rate or factor pricing under this system nonpar securities are deliverable at the futures price times a factor which is the price of the delivered security relative to the par security where both are discounted at the yield of the par security selling at par this paper first characterizes financial futures market equilibrium with yieldbased difference systems and then investigates theoretically and empirically the particular characteristics of factor pricing and yield maintenance pricing the major finding is that currently used differences systems produce financial futures prices which systematically understate the spot market price of the par security vice president chicago mercantile exchange this research was conducted while the author was economist financial studies section board of governors of the federal reserve system the opinions in this paper are those of the author and do not necessarily reflect the opinions of the board

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

constructing confidence intervals using the bootstrap an application to a multi product cost function a multi product cost function system is estimated for 387 banks in states that allow branch banking the bootstrap resampling method is used to construct confidence intervals for marginal costs output cost elasticities economies of scale and scope and allen elasticities of substitution confidence intervals for these measures are usually constructed using a first order variance approximation under a normality assumption but such confidence intervals are inexact if the measures are not normally distributed or the variance approximations are imprecise we find that the bootstrap standard error estimates can differ significantly from the usual estimates furthermore we use the bootstrap to expand the analysis of cost function regularity properties copyright 1990 by mit press

how closely do top income shares track other measures of inequality in recent years researchers have used taxation statistics to estimate the share of total income held by the richest groups such as the top 10 or the top 1 compiling a standardised top income shares dataset for 13 developed countries i find that there is a strong and significant relationship between top income shares and broader inequality measures such as the gini coefficient this suggests that panel data on top income shares may be a useful substitute for other measures of inequality over periods when alternative income distribution measures are of low quality or unavailable

market reforms and commodity price volatility the case of east african coffee market the goal of this paper is to examine the impact of commodity market reforms on producer price volatility using evidence from the east african coffee market the results based on time varying volatility models and key summary statistics show that coffee market reforms in the east african community eac are associated with changes in producer price volatility and volatility persistence at both country and regional levels however reforms were not the only cause of changes in price volatility the study further shows that reforms had different effects on prices volatilities of arabica and robusta varieties of coffee grown in individual eac countries these findings have wider implication for commodity market reforms and producer price stabilisation policies in the eac and coffee producing countries in sub sahara africa

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

executive compensation a modern primer this article studies traditional and modern theories of executive compensation bringing them together under a simple unifying framework accessible to the general interest reader we analyze assignment models of the level of pay and static and dynamic moral hazard models of incentives and compare their predictions to empirical findings we make two broad points first traditional theories find it difficult to explain the data suggesting that compensation results from rent extraction by ceos however more modern shareholder value theories that arguably better capture the ceo setting do deliver predictions consistent with observed practices suggesting that these practices need not be inefficient second seemingly innocuous features of the modeling setup often made for tractability or convenience can lead to significant differences in the model s implications and conclusions on the efficiency of observed practices we close by highlighting apparent inefficiencies in executive compensation and additional directions for future research