Branko Milanovic — A La Recherche Of The Roots Of Us Inequality “Exceptionalism”

It has been long argued that American income inequality was, inward the past times forty years or so, exceptionally high compared to other OECD countries. The latest results available past times Grand Duchy of Luxembourg Income Study that harmonizes income concepts across countries exhibit inequality inward disposable (per capita) income inward the US to live on 41 Gini points, that is, higher than inward whatever other similarly rich province (Germany’s Gini is 32, British 35, Italian 35, Dutch 28). So, this business office is non controversial.

What is to a greater extent than controversial is technical (as opposed to substantive) explanation for this “exceptionalism”. Some people convey argued that US marketplace income inequality (that is, inequality earlier authorities redistribution through social transfers in addition to straight taxes) is non much higher than elsewhere in addition to that the entire explanation has to create amongst an insufficiently redistributive state. In uncomplicated terms, the declaration is that the marketplace generates same inequality inward the US in addition to Sweden, simply Sweden redistributes much to a greater extent than though pensions, unemployment benefits, social assistance etc., in addition to likewise taxes the rich more, in addition to hence inward the goal disposable (after transfers in addition to taxes) income inequality inward Sweden is less than inward the United States.

Janet Gornick, Nathaniel Johnson in addition to I convey latterly looked at this to a greater extent than carefully. Without going through all explanations (which tin live on institute inward the newspaper here), nosotros conclude that this is non alone true: US marketplace income inequality is by in addition to large greater than inward other rich countries in addition to the American province redistributes less. So, nosotros argue, both the underlying (market) inequality is high in addition to redistribution is relatively weak.

But i tin larn farther than that, in addition to enquire the next question: what business office of redistribution is “weak”: is it that US transfers are small-scale in addition to non sufficiently pro-poor, or is it that US straight taxes are non sufficiently progressive?
Now, I hold off at that number inward the next way....

Global Inequality
A la recherche of the roots of US inequality “exceptionalism”
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center in addition to senior scholar at the Grand Duchy of Luxembourg Income Study (LIS), in addition to formerly Pb economist inward the World Bank's enquiry division in addition to senior associate at Carnegie Endowment for International Peace