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The Rise of the Working Rich, Market Imperfections, and Income Inequality

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  • Chhy, Niroth

Abstract

This paper attempts to explain the recent substantial increase in income inequality, which is largely due to the explosion of the very top labor incomes (i.e., the rise of the working rich), in the rich countries especially the United States. This paper points to technological progress and (less importantly to) capital accumulation as the main cause of the (universal) increase in income inequality starting from the late 1970s; also, this paper points to the differences in the nature of demand as the main cause of the large cross-country differences. This paper will build a simple general equilibrium model to formalize this idea and to provide some new insights into the analysis of income inequality.

Suggested Citation

  • Chhy, Niroth, 2016. "The Rise of the Working Rich, Market Imperfections, and Income Inequality," MPRA Paper 75373, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75373
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    File URL: https://mpra.ub.uni-muenchen.de/75373/1/MPRA_paper_75373.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Income inequality; trickle-down; entrepreneurs; supermanagers;
    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

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    This paper has been announced in the following NEP Reports:

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