Markups, Taxes, and Rising Inequality

Stéphane Auray, Aurélien Eyquem, Bertrand Garbinti and Jonathan Goupille-Lebret

No 17590, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How to explain rising income and wealth inequality? We build an original heterogeneous agent model with three key features: (i) an explicit link between firm's market power and top income shares, (ii) a granular representation of the tax and transfer system, and (iii) three assets with endogenous portfolio decisions. Using France as an illustration, we look at how changes in markups, taxes, factor productivity, and asset prices affect inequality dynamics over the 1984-2018 period. Rising markups account for the bulk of rising income inequality. Wealth inequality dynamics result mostly from changes in saving rate inequality but only in response to the exogenous changes in taxation and markups. Our results point to the critical importance of endogenous saving decisions in response to exogenous shocks as a key driver of wealth inequality.

Keywords: Heterogeneous agents; Taxes; Income inequality; Wealth inequality (search for similar items in EconPapers)
JEL-codes: D4 E2 H2 O4 O52 (search for similar items in EconPapers)
Date: 2022-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17590 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Markups, Taxes, and Rising Inequality (2022)
Working Paper: Markups, Taxes, and Rising Inequality (2022)
Working Paper: MARKUPS, TAXES, AND RISING INEQUALITY (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17590

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17590

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().