The Evolution of Top Incomes

I haven't had a chance to read this yet, but I hope to:

The Evolution of Top Incomes: A Historical and International Perspective, by Thomas Piketty and Emmanuel Saez, NBER WP 11955, January 2006:  Abstract This paper summarizes the main findings of the recent studies that have constructed top income and wealth shares series over the century for a number of countries using tax statistics. Most countries experience a dramatic drop in top income shares in the first part of the century due to a precipitous drop in large wealth holdings during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries but not at all in continental Europe countries or Japan. This increase is due to an unprecedented surge in top wage incomes starting in the 1970s and accelerating in the 1990s. As a result, top wage earners have replaced capital income earners at the top of the income distribution in English speaking countries. We discuss the proposed explanations and the main questions that remain open. [Open link]

Here are some figures from the paper:

 

 

Comments

[RN]

Thanks for this post - those are absolutely fascinating graphs.

[Robert]

I'd be fascinated to see Australia's plot since they suffer from many Anglo-Saxon afflictions but have a far more rabid "fisc" with teeth than US UK or Canada. Germany and the nordics would also be instructive by way of comparison - especially Sweden where egalitarian as one might think they are, concentration is high.

[bailey]

great stuff, thx.

[LE passant du sans-souci]

Robert,

I agree Sweden and Australia would be interesting, but together with other countries who did not suffer from WWII : Switzerland, Argentina, Portugal.
Or countries who suffered big times in other years: Spain, Lebanon...

[Robert]

I wonder whether, for example, the French and Japanese are lagging more in the Letter of the Stats than the Spirit of the Stats due to tax regulations that make it incumbent upon the rich (who wish NOT to be redistribution statistics) to keep their potential income in their tax-advantaged holding companies or listed vehicles and let their value roll up there, rather than take it as salaried income or dividends. For once taken, the I believe the French will assess an annual "wealth tax" in addition to ordinary income tax that perhaps disadvanatges one from taking excess income or dividends, in fact. It may be more advantageous to keep wealth in corporate structures, and use the corporate perks for quality of life things, thus hiding the true data from the stats (and the State). The wealthy there, are, in effect, "asset rich" and "cash poor", or at least disincented from taking any more cash than what they "need" for their lifestyle.

Also French and Japanesse shares lagged recoveries in Anglo Saxon countries and on emight expect these numbers probably began to turn up in earnest in 2004 and 2005.

Finally, Australia is interesting because I believe disincentives to taking money out of a company are neutralized because it is my understanding that Australian tax policy effectively "marks ones assets to market" thus taxing one upon the increase in value of assets - apparently because the State views the tax deferral on the increase in "wealth" as a free loan from the State. Can anyone confirm this?