CONTENTS

Contributors xiii

Introduction: Income Distribution Today xvii

Acknowledgments lxv

Volume 2A

Part I. Concept and Approaches 1

1. The Principal Problem in Political Economy: Income Distribution

in the History of Economic Thought 3

Agnar Sandmo

1.1.

1.2. The Positive Economics of Income Distribution 6

1.3. ValueJudgmentsandRedistribution 37

1.4. Concluding Reflections 58

Acknowledgments 61

References 62

2. Inequality, Income, and Well-Being 67

Koen Decancq, Marc Fleurbaey, Erik Schokkaert

2.1. Introduction 68

2.2. A Brief Historical Sketch 72

2.3. Inequality of What? 75

2.4. MultidimensionalInequalityandDominance 105

2.5. Applications 113

2.6. Conclusion 133

Acknowledgment 134

References 134

3. MultidimensionalPovertyandInequality 141

Rolf Aaberge, Andrea Brandolini

3.1. Introduction 142

3.2. Preliminaries: Dimensions, Indicators, and Weights 148

3.3. Multidimensional Poverty Measurement 156

3.4. MultidimensionalInequalityMeasurement 189

3.5. Summary and Conclusions 200

Acknowledgments 203

References 203

4. EqualityofOpportunity 217

John E. Roemer, Alain Trannoy

4.1. Introduction 218

4.2. Egalitarian Political Philosophy Since Rawls 220

4.3. A Model and Algorithm for Equal-Opportunity Policy 229

4.4. A More General Approach 239

4.5. TheFleurbaey-ManiquetApproach 243

4.6. Economic Development 248

4.7. Dynamics 256

4.8. Preparing the Ground for Empirical Analysis 259

4.9. Do People Advocate EOp? Lessons from Questionnaires and Experiments 261

4.10. Inequality of Opportunity: Measurement Issues and Empirical Results 272

4.11. Results 289

4.12. Conclusion 294

Acknowledgments 296

References 296

5. Polarization 301

Jean-Yves Duclos, Andre-Marie Taptue

5.1. Introduction 302

5.2.

5.3. Notation 309

5.4. Income Polarization 310

5.5. Bipolarization 318

5.6. Social Polarization 337

5.7. Socioeonomic Polarization 341

5.8. Multidimensional Polarization 348

5.9. Polarization in Practice 351

5.10. Conclusion 355

Acknowledgments 355

References 355

6. Statistical Methods for Distributional Analysis 359

FrankA. Cowell, Emmanuel Flachaire

6.1. Introduction 361

6.2. Data 364

6.3. Density Estimation 369

6.4. Welfare Indices 394

6.5. Distributional Comparisons 423

6.6. Other Estimation Problems 437

6.7. Conclusions 452

Acknowledgments 458

References 458

Part II. Evidence 467

7. Long-RunTrendsintheDistributionofIncomeandWealth 469

Jesper Roine, Daniel Waldenstrom

7.1. Introduction 471

7.2. Long-Run Trends in Income Inequality 477

7.3. Long-RunTrendsinWealthInequality 511

7.4. DeterminantsofLong-RunTrendsinInequality 546

7.5. Summary and Concluding Remarks 567

Acknowledgments 570

Appendix 570

References 581

8. Post-1970 Trends in Within-Country Inequality and Poverty:

Rich and Middle-Income Countries 593

Salvatore Morelli, Timothy Smeeding, Jeffrey Thompson

8.1. Introduction 594

8.2. ChoosingaYardstickandItsComponents 595

8.3. Poverty Measurement and Trends 604

8.4. Inequality in Income 619

8.5. Summary and Conclusions 687

Acknowledgments 690

References 690

9. Recent Trends in Inequality and Poverty in Developing Countries 697

Facundo Alvaredo, Leonardo Gasparini

9.1. Introduction 698

9.2. The Developing World: Characterization and Data 700

9.3. Inequality: Levels 705

9.4. Inequality: Trends 720

9.5. Poverty: Levels 753

9.6. Poverty: Trends 763

9.7. Concluding Remarks 789

Acknowledgment 790

Appendix 791

References 796

10. Income Mobility 807

Markus Jantti, Stephen P. Jenkins

10.1. Introduction 808

10.2. MobilityConcepts 810

10.3. MobilityMeasurement 822

10.4. Intragenerational Mobility: Evidence 855

10.5.

10.6. Conclusions 923

Acknowledgments 924

References 924

11. TheGlobalDistributionofIncome 937

Sudhir Anand, Paul Segal

11.1. Introduction 938

11.2. Why Study the Global Distribution of Income? 939

11.3. Which Global Distribution of Income? 941

11.4. Data 945

11.5. Estimating the Global Distribution of Income 953

11.6. Between-and Within-Country Inequality 963

11.7. RelativeandAbsoluteGlobalInequality 967

11.8. GlobalPoverty 968

11.9. Conclusion 973

Acknowledgments 975

Appendix. Estimates of Global Inequality Based on the Common Sample Over Time 975

References 977

12. GenderInequality 981

Sophie Ponthieux, Dominique Meurs

12.1. Introduction 983

12.2. Individual and/or Household Income and Living Standards: From

Measurement Issues to Conceptual Issues and Back to Measurement Issues 985

12.3. The Gender Wage Gap 1005

12.4. The Case of Self-Employment 1050

12.5. The Gender Gap in Pensions 1059

12.6. Nonmarket Work, the Gender Division of Labor, and Gender Inequality 1068

12.7. Wealth and Gender 1105

12.8. Conclusion 1117

References 1119

13. Attitudes to Income Inequality: Experimental and Survey Evidence 1147

Andrew E. Clark, Conchita D'Ambrosio

13.1. Introduction 1148

13.2. TheComparativeView 1151

13.3. TheNormativeView 1170

13.4. OutstandingIssues 1185

13.5. Conclusion 1199

Acknowledgments 1201

References 1201

Index 1209

Volume 2B

PartIII. Explanations 1227

14. InequalityinMacroeconomics 1229

Vincenzo Quadrini, Jose-Victor Rios-Rull

14.1. Some Facts on the Income and Wealth Distribution 1233

14.2. Modeling the Sources of Macro Inequality 1236

14.3. TheDynamicsofInequality 1256

14.4. Inequality and Financial Markets 1272

14.5. The Political Economy Channel 1288

14.6. Conclusion 1295

Acknowledgments 1295

Appendix A. Derivation of the Inequality Index 1296

Appendix B.

References 1298

15. Wealth and Inheritance in the Long Run 1303

Thomas Piketty, Gabriel Zucman

15.1. Introduction 1304

15.2. TheLong-RunEvolutionofWealth-IncomeRatios 1308

15.3. The Long-Run Evolution of Wealth Concentration 1319

15.4. The Long-Run Evolution of the Share of Inherited Wealth 1326

15.5. Accounting for the Evidence: Models and Predictions 1342

15.6. Concluding Comments and Research Prospects 1365

Acknowledgments 1366

References 1366

16. Intrahousehold Inequality 1369

Pierre-Andre Chiappori, Costas Meghir

16.1. Introduction 1370

16.2. The Collective Model: Concepts, Definitions, and Axioms 1375

16.3. Modeling Household Behavior: The Collective Model 1378

16.4. TheDeterminantsofIntrahouseholdAllocation 1386

16.5. Identification 1390

16.6. Empirical Findings 1403

16.7. Conclusion 1415

Acknowledgments 1416

References 1416

17. HealthandInequality 1419

Owen O'Donnell, Eddy Van Doorslaer, Tom Van Ourti

17.1. Introduction 1420

17.2. Health and Income: A First Pass 1425

17.3. Health Determination of Economic Inequality 1436

17.4. Economic Determination of Health Inequality 1476

17.5. Economic Inequality as a Determinant of Health 1499

17.6. Conclusion 1513

Acknowledgments 1516

Appendix 1516

Data Sources 1520

References 1520

18. Labor Market Institutions and the Dispersion of Wage Earnings 1535

Wiemer Salverda, Daniele Checchi

18.1. Introduction 1536

18.2. Earnings Distribution and Income Distribution: A Short Tale of Two Long Literatures 1540

18.3. Wage Dispersion: Measurement and Stylized Facts 1561

18.4. Theoretical Approaches to Wage Dispersion and the Role of Institutions 1593

18.5. LMIs and Wage Inequality: An Empirical Assessment 1623

18.6. Conclusion and Future Research 1655

Acknowledgments 1657

Appendix A. Country Codes 1658

Appendix B. Data Sources and Additional Tables on Earnings 1659

Appendix C.

Appendix D. Literature Summary Tables: Household Incomes and Earnings

and Wage Dispersion and Institutions 1670

References 1714

19. Cross-Country Evidence of the Multiple Causes of Inequality

ChangesintheOECDArea 1729

Michael F. Forster, Istvan Gyorgy Toth

19.1. Introduction 1730

19.2. The Research Question and Methods to Explain Inequality and its Change 1732

19.3. DataSourcesforCross-CountryStudies 1739

19.4. DefinitionofInequalityMeasuresandTheirVariability 1750

19.5. Drivers of Inequality: Main Explanations 1755

19.6. Conclusions: Major Findings from the Literature Survey and Implications

for Further Research 1799

Acknowledgments 1831

References 1831

20. Globalization and Inequality 1845

Ravi Kanbur

20.1. Introduction 1846

20.2. Immediate Post-War Theories, Predictions, and Evidence 1849

20.3. Experience and New Theory from the 1980s Onward 1852

20.4. Economic Crisis and Income Distribution 1858

20.5. Globalization and Gender Inequality 1862

20.6. Openness and Spatial Inequality 1865

20.7. International Migration, Remittances, and Inequality 1869

20.8. National and Global Policy Responses 1873

20.9. Conclusion 1876

References 1877

PartIV. Policies 1883

21. Democracy, Redistribution, and Inequality 1885

Daron Acemoglu, Suresh Naidu, Pascual Restrepo, James A. Robinson

21.1. Introduction 1886

21.2. Theoretical Considerations 1890

21.3. Previous Literature 1902

21.4. Econometric Specification and Data 1909

21.5. Main Results 1918

21.6. Conclusion 1953

Acknowledgments 1955

Appendix A. Comparison to Rodrik (1999) 1955

Appendix B. Results Using Other Measures of Democracy 1959

References 1960

22. The Idea of Antipoverty Policy 1967

Martin Ravallion

22.1. Introduction 1968

22.2. WealthDynamicsandAntipovertyPolicies 1971

22.3. TheUtilityofPoverty 1974

22.4. TheFirstPovertyEnlightenment 1979

22.5.

22.6. TheSecondPovertyEnlightenment 1994

22.7. TheIdeaofaProgressiveMarketEconomy 2010

22.8. TheFinalBlowtotheIdeaoftheUtilityofPoverty? 2018

22.9. Direct Interventions in Modern Times 2028

22.10. Conclusions 2044

Acknowledgments 2045

Appendix 2045

References 2047

23. The Welfare State and Antipoverty Policy in Rich Countries 2063

Ive Marx, Brian Nolan, Javier Olivera

23.1. Setting the Scene 2064

23.2. Social Protection and Redistribution 2080

23.3. Beyond Social Protection 2108

23.4. The Welfare State, Antipoverty Policy, and the Economic Crisis of the Late 2000s 2120

23.5. Future Research Directions 2126

Acknowledgments 2128

References 2128

24. MicrosimulationandPolicyAnalysis 2141

Francesco Figari, Alari Paulus, Holly Sutherland

24.1. Introduction and Overview 2142

24.2. What Does Microsimulation Add to Analysis of Income Distribution and

Redistribution? 2150

24.3. The Effects of Policy Changes on Income Distribution 2158

24.4. Challenges and Limitations 2182

24.5. Broadening the Scope 2192

24.6. Conclusions and Outlook for the Future 2200

Acknowledgments 2205

Appendix A. Increasing UK Child Benefit in 2001 and 2013: The Net Effects 2205

Appendix B. Comparison of Simulated Estimates of Income Tax with Administrative

Statistics, UK 2010-2011 2207

References 2210

Index

2223