Comparing the Secular Increasing Trend and Effect of the Response to the 2008 Financial Recession on Wealth Inequality in the U.S. with Other Nations Using the Median-based Gini Index

Joseph L. Gastwirth () and Qing Shi
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Joseph L. Gastwirth: George Washington University
Qing Shi: George Washington University

Journal of Quantitative Economics, 2022, vol. 20, issue 1, No 13, 276 pages

Abstract: Abstract Piketty (Capital in the Twenty First Century; Cambridge MA: Belknap Press) and Dorling (Inequality and the 1%; London: Verso) observed that wealth inequality was increasing at a faster rate than income inequality. Wolff (2017) reached the opposite conclusion based on the fact that the Gini index of net worth increased by 9.8% from 1983 to 2016 while the Gini index of income increased by 24.5% over the same period. Because the Gini index does not fully capture changes in a distribution when almost all gains in income or wealth accrue to the upper end, Gastwirth (Statistical Journal of the IAOS; 30:311–320) used a median-based version (G2), which showed that income inequality in the U.S. and Sweden increased at a faster rate than the usual Gini index. Here, analyzing wealth data using G2 shows that wealth inequality increased faster than the Gini index in the U.S. from 1989 to 2019. Similar results are found for Sweden, India and China from 2000 to 2020. A study of the effect of the 2008 financial crisis using the time trend of G2 provides strong evidence that Sweden’s response it decreased wealth inequality, but the reverse was true in the U.S. Canada was the only nation of the six studied where wealth inequality declined over the 2000–2020 period.

Keywords: Gini index; Effect of financial crisis; Income inequality; Median-based Gini index (G2); Return on capital; Wealth inequality (search for similar items in EconPapers)
JEL-codes: C20 D31 G51 I20 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40953-022-00308-9

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