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Title:Do rising top incomes lift all boats? PDF Logo
Authors:Andrews, Dan
Jencks, Christopher
Leigh, Andrew
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4920
Abstract:Pooling data for 1905 to 2000, we find no systematic relationship between top income shares and economic growth in a panel of 12 developed nations observed for between 22 and 85 years. After 1960, however, a one percentage point rise in the top decile's income share is associated with a statistically significant 0.12 point rise in GDP growth during the following year. This relationship is not driven by changes in either educational attainment or top tax rates. If the increase in inequality is permanent, the increase in growth appears to be permanent. However, our estimates imply that it would take 13 years for the cumulative positive effect of faster growth on the mean income of the bottom nine deciles to offset the negative effect of reducing their share of total income.
Subjects:Inequality
growth
income distribution
national income
JEL:D31
N10
O57
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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