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- To: hlc710@xxxxxxxxxxx
- Subject: Re: Income distribution
- From: Helmet4000
- Date: Fri, 30 Aug 2002 17:14:38 -0400
Harry,
Yes I agree. Income distribution is, to a large extent politics and ideology. As institutions change, so does the distribution of income (family income, transfers, wages, etc.). The human capital model is an OK model of say earnings inequality. If we reduce the inequality in education maybe we can reduce inequality in income. For instance, studies generally show an inverse relation between the share of high school graduates 25 years and older and income inequality.
At the same time, inequality is complex. There is no simple explanation for the historical rise in inequality (and of course there is so much debate). On the one hand, a lot of people are more interested in making a career out of studying income inequality than of doing research which may point to some possible institutional changes that we can make in order to reduce economic inequalities. Over and over, I witness people showing that no matter what group they look at, income inequality has increased since the 1970s. It seems pretty foolish (at this point) to keep documenting a trend that we already know about.
Galbraith (1998, Created Unequal) gives us a few suggestions (keep the minimum wage adjusted for inflation, full employment). I looked at the effects of state-level minimum wages on the Gini for families (B.A. honor's thesis) using state data for 1960-1990 and found that state minimum wages reduce the Gini once the effects of other factors are purged. Using quintiles, the state minimum wage generates a reduction in the income shares going to the top quintile while increasing the income shares going to the bottom three quintiles. While the effect is not overwhelming, it is certainly not due to chance.
-Tom
In a message dated Fri, 30 Aug 2002 12:16:51 PM Eastern Standard Time, hlc710@xxxxxxxxxxx writes:
> With referance to income distribution. Income distribution is a matter of politics and ideology at least as much as it is economics. Restricting discussion of economics in general, or income distribution in particular, to economic theory and methodology may make for intellectually amusing intercourse, but it is about as useful as doing the cross word puzzles.
>
> Income distribution is largely determined by the interplay of politics and economics within the framework of our political economy. Our system may be, and is, a lot better that many other systems, but it can be argued that it has a long way to go to achieve satisfactory standards of fairness and justice.
>
> The problem is the system - the framework of political and economic institutions that is our political economy- and unless we understand it, how it works and what makes it like it is, we can't fix it.
>
> It seems to me that this is less methodology than plain common sense and common observation, besides I am suggesting specifically that we pay some attention what David Ricardo in the opening lines of his Principles of Political Economy said was the principal problem in political economy, namely
> income distribution.
>
> Harry L. Cook
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