In an excellent new paper posted on the National Bureau of Economic Research website today, Facundo Alvaredo, Anthony Atkinson, Thomas Piketty and Emmanuel Saez break down what it really means to be part of the top 1% of the income distribution.
The paper diagnoses the resurgence of the economic domination of the top 1% in certain parts of the industrialized world as the result of four different causes:
- The impact of tax policy, specifically cuts to the top rate.
- A "richer" view of the labor market, where cuts to the top tax rates lead management to increase their own compensation rather than growing enterprise employment.
- Inherited wealth making a comeback.
- The correlation between earned income and capital income.
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- Thomas Piketty