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Rising top incomes do not raise the tide

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  • Herzer, Dierk
  • Vollmer, Sebastian

Abstract

This paper examines the long-run relationship between top income shares and economic growth for a panel of nine high-income countries over the period from 1961 to 1996. We use panel cointegration and causality techniques that are robust to omitted variables, slope heterogeneity, and endogenous variables. Our main findings are that an increase in the top decile of income share reduces growth, and that long-run causality also runs in the opposite direction—from economic growth to top income shares.

Suggested Citation

  • Herzer, Dierk & Vollmer, Sebastian, 2013. "Rising top incomes do not raise the tide," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 504-519.
    • Handle: RePEc:eee:jpolmo:v:35:y:2013:i:4:p:504-519
    DOI: 10.1016/j.jpolmod.2013.02.011
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    Cited by:

    1. Herzer, Dierk & Nagel, Korbinian, 2019. "The impact of adult and non-adult mortality on development: Two centuries evidence from a panel of industrial countries," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 352-371.
    2. Thomas Goda & Alejandro Torres, 2015. "Class or location? What explains the rising tide of absolute global income inequality during 1850-2010?," Documentos de Trabajo de Valor Público 12663, Universidad EAFIT.
    3. Leena Kalliovirta & Tuomas Malinen, 2020. "Non‐Linearity and Cross‐Country Dependence of Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(1), pages 227-249, March.
    4. Dierk Herzer, 2017. "The Long-run Relationship Between Trade and Population Health: Evidence from Five Decades," The World Economy, Wiley Blackwell, vol. 40(2), pages 462-487, February.
    5. Thomas Goda & Santiago Sanchez, 2018. "Market and Disposable Top Income Shares adjusted by National Accounts Data," Journal of Income Distribution, Ad libros publications inc., vol. 26(2), pages 1-22, July.
    6. Tuominen Elina, 2016. "Changes or levels? Reassessment of the relationship between top-end inequality and growth," Working Papers 1609, Tampere University, Faculty of Management and Business, Economics.
    7. Tuomas Malinen, 2016. "Does income inequality contribute to credit cycles?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 309-325, September.
    8. Krenz, Astrid, 2016. "Do political institutions influence international trade? Measurement of institutions and the Long-Run effects," University of Göttingen Working Papers in Economics 276, University of Goettingen, Department of Economics.
    9. Shapor, Maria (Шапор, Мария), 2023. "Modern trends and problems of income inequality in an open economy [Современные Тенденции И Проблемы Неравенства Уровня Доходов В Условиях Открытой Экономики]," Working Papers w20220253, Russian Presidential Academy of National Economy and Public Administration.
    10. Khusainov, Bulat & Kireyeva, Anel & Sultanov, Ruslan, 2017. "Eurasian Economic Union: Asymmetries of Growth Factors," MPRA Paper 78841, University Library of Munich, Germany.
    11. Sara Mota Cardoso & Aurora A. C. Teixeira, 2020. "The Focus on Poverty in the Most Influential Journals in Economics: A Bibliometric Analysis of the “Blue Ribbon” Journals," Poverty & Public Policy, John Wiley & Sons, vol. 12(1), pages 10-42, March.
    12. Groot, Loek & van der Linde, Daan & Vincent, Charlotte, 2018. "Inequality of opportunity in the United Kingdom, 1991–2008," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1255-1271.
    13. Cabral, René & García-Díaz, Rocío & Mollick, André Varella, 2016. "Does globalization affect top income inequality?," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 916-940.
    14. Thomas Goda & Alejandro Torres García, 2017. "The Rising Tide of Absolute Global Income Inequality During 1850–2010: Is It Driven by Inequality Within or Between Countries?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1051-1072, February.
    15. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, Tampere University, Faculty of Management and Business, Economics.

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    More about this item

    Keywords

    Top income shares; Trickle-down economics; Income inequality; Growth; Panel cointegration;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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