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LABOR ECONOMICS Lecture 6: Inequality – Part II Prof. Saul Hoffman Université de Paris 1 Panthéon-Sorbonne March, 2013

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inequality & INEQUALITY inequality – by education, race, gender Important big changes – supply/demand analysis Tale of two half-centuries INEQUALITY - the very very very rich and the rest of us The 1% and 0.1% & the Occupy movement 2

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inequality Supply/Demand of Skill Race Between Technology and Education (Katz/Goldin) In general: – Technological change has increased demand for skill – The SBTC hypothesis/computerization – Educational expansion has increased supply of skill – Equilibrium real wage depends on relative increases – i.e., The Race … A tale of 2 half centuries 3

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Inequality by Education – 20 th Century 4

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inequality – New Developments Rising Within-Group Differences exacerbate the between-group diffs 2000s: Differing trends above and below median – 90 th v 50 th – 50 th v 10 th 5

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INEQUALITY Now the other kind Comparisons across the income distribution – Top 5%, 1% and.1%. What has happened and what (if anything) should we do about it? Facts and policy 6

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U.S. Income Shares, – the 1% and 0.1% 7

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US Income Growth By Income Group 8

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Inequality and Taxes 9

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What About France? – Share of Income, Top Earners (from Piketty, JPE, 2003) 10

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Explanations Why are the rich so much richer than before? Technological Change has created many winner-takes-almost-all opportunities – Scalability of markets/economics of superstars – Now v Then Returns to Human Capital vs Capturing Rents 11

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Now What? Inequality does serve a purpose How much is necessary? Role of tax reform in broader size of govt and debt debate 12

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