What’s So Bad About More Inequality?

Lars Osberg

Working Papers from Dalhousie University, Department of Economics

Abstract: “More Inequality” can mean either more inequality in comparisons of different societies at a particular point in time or more inequality over time within a given society. Cross-sectional comparisons argue that countries with higher long-run levels of inequality of income are more unhealthy, less democratic, more crime-infested, less happy, less mobile and less equal in economic opportunity – but controversy surrounds some estimates. More importantly, cross-sectional comparisons of the implications of different levels of economic inequality implicitly presume that these represent steady state outcomes. The paper compares long-run levels of real income growth at the very top, and for the bottom 90% and bottom 99% in the U.S., Canada and Australia to illustrate the uniqueness of the post-WWII period of balanced growth (and consequent stability of the income distribution). The new normal of the U.S., Canada and Australia is unbalanced growth – specifically, over the last thirty years the incomes of the top 1% have grown significantly more rapidly than those of everyone else. The paper examines whether there is a plausible auto-equilibrating market mechanism that will equalize income growth rates and stabilize inequality. Unbalanced income growth necessarily implies changes in consumption and savings flows which accumulate to changed stocks of indebtedness, financial fragility and periodic macro-economic crises. Greater economic and sociopolitical instability is therefore a key implication of more inequality over time.

Pages: 45 pages
Date: 2014-02-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://wp.economics.dal.ca/RePEc/dal/wpaper/DalEconWP2014-01.pdf (application/pdf)

Related works:
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:dal:wpaper:daleconwp2014-01

Access Statistics for this paper

More papers in Working Papers from Dalhousie University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by James McNeil ().