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Growth is (really) good for the (really) rich

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  • Campos-Vazquez, Raymundo M.
  • Chavez, Emmanuel
  • Esquivel, Gerardo

Abstract

This paper analyzes the relationship between mean income and the income of the rich. Our methodology closely follows that of Dollar and Kraay (2002), but instead of looking at the bottom of the distribution, we analyze the top. We use panel data from the World Top Incomes database, which collects top income data from several countries using tax returns as the raw source. We define the “rich” as earners in the top 10 percent, 1 percent, 0.1 percent, and 0.01 percent of the income distribution. We find that economic growth is good for the rich in the sense that the mean income of the top decile of the distribution grows in the same proportion as that of the whole population. However, we also find that the income of earners in the top percentile of the distribution and above grows in an even larger proportion than average income: that is, economic growth is really good for the really rich. We also find that during economic downturns, the average income of top earners responds proportionally less to changes in mean income than during economic expansions. Our results are robust to different sample specifications.

Suggested Citation

  • Campos-Vazquez, Raymundo M. & Chavez, Emmanuel & Esquivel, Gerardo, 2013. "Growth is (really) good for the (really) rich," MPRA Paper 52488, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52488
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    More about this item

    Keywords

    Growth; Income distribution; Inequality; Top Income; Rich.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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