World economy week 8 - Lecture notes 4.3, 4.4 PDF

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Inequality and living standards: If markets efficient and property rights well specified, inequality is irrelevant to standards of living, however, markets may fail and access to institutions may be inequal o Government may redistribute or provide, however, costly and inefficient o Lorenz Curve: o ...

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Inequality and living standards: 

If markets efficient and property rights well specified, inequality is irrelevant to standards of living, however, markets may fail and access to institutions may be inequal o Government may redistribute or provide, however, costly and inefficient o Lorenz Curve: o Gini closer to 1 = more unequal  Inner area / triangle

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Difficult to find precise records Underlying causes of inequality gleaned from changes in relative incomes of skilled/unskilled workers

Kuznets curve: 

Inequality fell in developed countries in first half of 20th C o Kuznets assumed it rose before it fell

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Reasons for initial rise: o Engels pause o Rise in inequality from concentration in savings at top end of distribution o K ownership more concentrated whereas Labour ownership more dispersed resulting in stalling real wages Reasons for fall: o Rising education increases income earning opportunities beyond subsistence

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o Wider range of income sources Growth may not result in curve: o Critiques: used 1900-1950 data WWI, Great Depression, WWII unusual events o

More robust idea: technological change causes inequality  Goldin and Katz

Lindert 1986: 

Supports Kuznets view: o IR concentrated benefits to merchants and landowners o Constant inequality/worsening in late 19th C o Massive declines in 20th C  Relative importance of land as revenue generating asset declines over time, while movable wealth (personalty) rises

Social mobility in industrial England: 

Clark and Cummins 2014: o IR brought new occupations and moved people out of agriculture  Linked father and son occupations  From marriage records, shows some social mobility, e.g. 65% with unskilled fathers have unskilled sons as well o However, son’s occupation after marriage may not be final 

Linked father and sons through censuses:  More mobility (21% vs 65%), however, still not very large, with 1% sons of unskilled ending up in professional class

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Compared to recent data Britain 1972  More mobility shown, modest at upper end, 8% remained unskilled at lower end

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Surname method:  Some surnames common in all statuses with same frequency, some disproportionately represented by elite  If frequency of rarer surnames declines over time, mobility is high 

Common names in IR shown to remain relatively the same, rarer names shown to pull away and towards mean so does not show much about inequality o Rarer names remain, however, much more prevalent in elite groups showing high status families remained in high status  Little change in social mobility...