Department of Economics

Syllabus Lecture Notes Problem Sets Some Suggested Reading (SSR) Supplemental Guest Lectures Reports by Week


Economics 350, Winter 2023: Guest Lectures

Week 1, January 3, 2023
  1. Thomas Coleman
    •  The main topics are:
      1. Top Shares and the U.S. Income Distribution
      2. Tax Progressivity and Growth in Transfers
        • I have listed the main readings for these two topics below, plus additional readings on related topics.
        1. Top Shares and U.S. Income Distribution
          • With the publication of Piketty and Saez (2003), income distribution studies focused intensively on administrative data – income reported on tax returns – and top income shares – the fraction of overall income earned by the top 10% or 1% or 0.1% of the distribution.
            1. Main papers
              • Piketty and Saez (2003): The original paper reporting distribution of administrative tax data, focusing specifically on “Top 1% shares”.
                • Note that later work shows that these original tax data results are not representative of what economists consider income.
              • Piketty, Saez, and Zucman (2018a): Updated – distribution of National Income – a more complete measure of all income.
              • Auten and Splinter (2022): Alternative (and more reliable) estimates of the distribution of National Income
              • Piketty, Saez, and Zucman (2019): Valuable debate (in the pages of the AER Papers &  Proceedings) between Piketty, Saez, Zucman on the one hand, Auten & Splinter on the other.
              • Auten and Splinter (2019b): Debate in pages of the AER Papers & Proceedings
            2. Additional papers with background, and additional information
              • Auten (2021): Review of some of the recent research
              • Song, Lachanski, and Coleman (2021): Discussion of “Three Myths” related to inequality: i) High top
                shares; ii) Decreasing mobility; iii) Market power.
              • Fixler, Gindelsky, and Johnson (2020a, 2021, 2020b): Estimates of the distribution of personal income
                by a group from the Bureau of Economic Analysis. Both white papers considering feasibility and
                measurement issues, and reporting estimates.

                • Personal income (versus national income) includes transfers (Social Security, Medicare, etc.) and
                  excludes corporate profits (particularly important for pre- vs post-TRA1986
              • Larrimore et al. (2021): Uses tax data plus additional sources to expand completeness of income (as
                in Piketty, Saez, and Zucman 2018a; Auten and Splinter 2022). Compares top 1% shares vs Piketty
                and Saez (2003) and finds lower shares.
              • Smith et al. (2019a) and Smith et al. (2019b): Focused on examining sources of top income – returns
                to human capital vs other capital, returns to entrepreneurial activity. By careful consideration of passthrough entities and income, and some nice “quasi-experimental” evidence, argue that human capital is an important component, and that the share of labor income in top income is dramatically higher than reported by Piketty, Saez, and Zucman (2018a).
              • Rose (2018a): compares across different studies. Rose (2018b) has some of the methodological issues.
        2. Tax Progressevity and Growth in Transfers
              • While there is much written about the top shares, there is much less written about tax progressevity and the growth in transfers. Nonetheless, the wealth of detailed data aggregate data across the income distribution that has been produced by various research groups (Piketty, Saez, Zucman; Auten & Splinter; the BEA) allows one to examine two important issues crucial for understanding the evolution of inequality over time:
                1. Progressevity and changes in the tax & transfer system: how much tax rates at the top versus bottom have changed. It is often thought that the U.S. tax system has become less progressive over the past 40 years, but that does not seem to be the case.
                2. Increased government transfers at the lower end of the income distribution.
              • Here are some of the articles and data sources:
                • Gramm, Ekelund, and Early (2022): A book that addresses the issue of transfers directly. But I am cautious about their measurements (for example the size of transfers for the bottom quintile in their Table 2.4 seems rather large).
                • Elwell, Corinth, and Burkhauser (2020, 2019): Transfers and taxes add dramatically to the growth in average income for the bottom quintile (bottom 20%). More generally shows the importance of i) expanding  completeness of coverage (from tax income to all income); ii) adjusting by household or tax unit size; iii) large impact of transfers (and taxes) for supporting lowest quintile.
                • Auten and Splinter (2022) do discuss “Tax Burdens” and point out that, when taxes and transfers are considered together (as a “net redistribution rate”) then the tax system has become substantially more progressive. Qualitatively similar results show up in the Piketty, Saez, Zucman data.
        3. Additional Reading and Miscellaneous Issues
          1.  Wealth Distribution
            • This is a very active arena, and these are only two of a large array of papers on the topic
              • Saez and Zucman (2016): Wealth estimates for US, reporting very high shares of the top 1%.
              • Bricker et al. (2016): Estimates top income and wealth shares, using administrative (tax) data and reconciling with Survey of Consumer Finances. Heavily critiques Saez and Zucman (2016). Finds lower top shares for wealth than does Saez and Zucman (2016), and lower top shares for income than Piketty and Saez (2003) (in line with Auten and Splinter (2022), Burkhauser et al. (2019), and Smith et al. (2019a), and others).
              • Smith, Zidar, and Zwick (2021): Uses tax data (as in Saez and Zucman 2016) but accounts for heterogeneity
                within asset classes. Find lower top wealth shares.
          2. Human Capital, Technological Progress, and Supply / Demand for Skills as Source of Rising Wage Premiums and Inequality Since 1980
            • Starting with Katz and Murphy (1992) there has been work showing that supply and demand for skills (human capital) has strong explanatory power for both the rise in the college-vs-High School wage premium since the 1980s, as well as the fall in the education premium in the first half of the 20th century.
              • Katz and Murphy (1992): generally considered the originating article
              • Goldin and Katz (2010, 2007): The 2010 reference is a comprehensive book, including development of new data series for the early 20th century. The 2007 is an NBER paper with some of the main arguments Acemoglu and Autor (2012): Analytical review of Goldin and Katz (2010) with nice discussion of the  foundational model. Excellent source for understanding the model.
              • Autor, Goldin, and Katz (2020): extends arguments and evidence from the earlier work
              • Murphy and Topel (2016a, 2016b): Published and working paper – more work on human capital, skills, and wage premiums.
              • Bivens et al. (2014) claim that relative supply and demand for skills (human capital or education) is not a good explanation for rising inequality since 1980s, but I think their arguments are weak or incorrect.
              • The original idea for supply / demand of skills and technological progress is from Tinbergen (1975)
          3. Mobility
            • Mobility across the lifecycle is crucial for understanding the implications of measured annual income  distributions. The import of a highly unequal distribution of annual income is very different if everyone stays in the same position year-by-year, versus if individuals move over time.
              • Auten, Gee, and Turner (2013)
              • Horwitz (2015)
          4. Market Power
            • There is a strong strand of thought that rising inequality is due to increased market power of firms—monopoly power on the part of producers on the consumption side, and monopsony power on the part of firms on the labor market side. I do not have any extensive literature on this arena, except to note that the following articles by Bivens and co-authors need to be treated with very deep skepticism – they appear to be somewhat politically motivated, and their knowledge and handling of data is poor.
              • Bivens and Mishel (2015): Compare labor productivity (output per hour) versus average and median compensation per hour. They claim a divergence between real producer and real consumer average hourly compensation which is in fact due to using a “consumer price deflator” that overstated inflation (both absolutely and relative to the “producer price deflator” they use.
              • Bivens et al. (2014) and Bivens, Mishel, and Schmitt (2018)
              • I have some very rough notes at http://www.hilerun.org/econ/papers/Bivens_Comments.pdf
          5. Miscellaneous
            • Horwitz (2015): Makes a valuable, and strong, argument to consider growth (the absolute level of income) as well as income inequality. Argues that the general level of consumption and welfare in the U.S. has grown considerably
        4. Reading List
        5. Slides
          1. Three Narratives on Income Inequality: Importance of Good Data Analysis, Methodology, and Theory
  2. Bruce Meyer
    2. Week 2
    3. Week 3
    4. Week 4
    5. Week 5
      1. Guest Lecture, Kevin Thom
  1. Week 6
  2. Week 7
  3. Week 8
  4. Week 9
    1. Guest Lecture, Robert Moffitt