Friday, March 9, 2012

Top 1 Percent Income Share Moved In Tandem In All Developed Countries Over Last 100 Years

Developed countries with different economic policies and amounts of income redistribution saw similar movement in the income share of the top 1 percent.

From The Wall Street Journal, "A Look at the Global One Percent: The remarkable similarity in income distribution across countries over the past century means domestic policy has less effect than many believe on who gets what." by Allan Meltzer:
the widening gap between the top 1% of earners and the remaining 99% is proof that American capitalism is unjust and should be traded in for an economic model more closely resembling the social democracies of Europe.

But an examination of changes in income distribution over nearly 100 years, not just in the United States but elsewhere in the developed world, does not bear this out. In a 2006 study titled "The Evolution of Top Incomes in an Egalitarian Society," Swedish economists Jesper Roine and Daniel Waldenström compared the income share of the top 1% of earners in seven countries from the early 1900s to 2004. Those countries—the U.S., Sweden, France, Australia, Britain, Canada and the Netherlands—all practice some type of democratic capitalism but also a fair amount of redistribution.

Source: The Wall Street Journal

As the nearby chart from the Roine and Waldenström study shows, the share of income for the top 1% in these seven countries generally follows the same trend line. That means domestic policy can't be the principal reason for the current spread between high earners and others. Since the 1980s, that spread has increased in nearly all seven countries. The U.S. and Sweden, countries with very different systems of redistribution, along with the U.K. and Canada show the largest increase in the share of income for the top 1%.

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