late seventies and the hollowing out of the middle class in many advanced economies, as showed in the famous “ elephant graph ” of milanovic, 6 have focused minds on developments in inequality. the striking developments can be seen in table 1 from alvaredo et al. ( 2017 ). 7 1 / 14 bis central bankers'speeches the data for the us from 1978 to 2015 show a cumulated decrease of 1 % in the income of the bottom 50 % of the population whereas the top 10 % saw their income increase by 115 % and the top 1 % by 198 %, a segment of the population that, by 2015, owned 20 % of income and 40 % of total us wealth. the numbers for france are significantly less unbalanced. in general, developments of inequality within european countries have been more subdued in recent decades than in other parts of the world. chart 1 shows this well, by depicting the evolution of income inequality, measured by the gini coefficient on household disposable income. 8 2 / 14 bis central bankers'speeches the first key fact shown in the chart is that, while income inequality has been steadily rising since the 1970s in the us and the uk, it has been quite stable in continental europe or even declining as in france and italy. in particular since the 1990s, the gini coefficient has been relatively stable in the european countries. equally important, the chart documents that the bulk of the dynamics in inequality is driven by low - frequency developments driven by structural and institutional factors, rather than by shocks at the business - cycle frequency. chart 1 uses disposable income which hides the much higher inequality associated with the distribution of income before taxes and transfers. to illustrate this point, chart 2 from wang and caminada ( 2014 ) 9 shows that difference and the fact that the fiscal systems of european countries dampen income inequality substantially more than those in other countries : in europe, the difference between the gini coefficient on market ( gross ) and disposable ( net ) income is almost 20 percentage points, more than twice the difference in other countries. 3 / 14 bis central bankers'speeches the slow - moving nature of inequality is also confirmed with the more recent survey data from the eurosystem household finance and consumption survey ( hfcs ). chart 3 summarises the euro area distributions of household income and net wealth10 since 2010. 4 / 14 bis central bankers'speeches both the distribution of income and the distribution of household net wealth remained

as development progresses inequality first increases and then starts decreasing as income grows, was confirmed until the 1970s with inequality decreasing since the period before world war i. the increase of inequality since the 1970s however, has disproved the hypothesis. a subsequent kuznets ’ inequality decline phase, with the same causes of the first ( higher taxes and transfers, wars, revolutions, hyperinflation and nationalisations ) seems quite unlikely at present. on the other hand, according to atkinson, piketty or milanovic, effective changes would require interventions at the level of market results by operating changes in endowments, which seem unlikely to happen. indeed, the type of measures they refer to could include wealth taxes, meaningful inheritance taxes, employee share ownership plans ( esops ) and share distributions28, birth endowments in the form of financial assets, for example. 29 most of these are seen by many economists as distortions detrimental to economic efficiency. usually, this concept refers to potential pareto improvements occurring when the income winners could compensate the losers, even if they do not do it. these are usually referred to as “ welfare enhancing ” consequences which, obviously, do not include any considerations about distribution while pretend to be the basis of “ scientific ” economic advice. maybe the normative word “ welfare ” in this narrow sense is an ambiguous misnomer that we should no longer use. this does not imply that economists should stop giving advice on economic efficiency and growth which are of course essential to reduce poverty and inequality. at the same time, we should be aware that all policies involve trade - offs and have distributional consequences, which are often forgotten or concealed. that is why gunnar myrdal underlined that economics could hardly be value neutral : he proposed that the only acceptable approach was for a researcher to disclose his values not hiding a pretense of science. 30 on this point, at the american economic association annual meeting in 1973, in a lecture about thorstein veblen, kenneth arrow reminded us that : “ the world is indeed full of injustices and the writings of economists full of attempts to disguise them ". 31 unfortunately, this has continued to hold true for a long time but, hopefully, much has started to change over the last few years, in the aftermath of the crisis. thank you for your attention. 1 krusell, p. ( 2017 ), “ akmww : a weapon of mass creation? ”, comment on ahn, kaplan, moll