Income and wealth inequality rose over the first 150 years of U.S. history. They may have risen at times in Britain before 1875. The first half of this century equalized pre-fisc incomes more in Britain than in America. From the 1970s to the 1990s inequality rose in both countries, reversing some of the previous equalization. Government redistribution explains part but not all of the reversals in inequality trends. Factor-market forces and economic growth would have produced a similar chronology of rises and falls in income inequality even without shifts in the progressivity of redistribution through government. For economies starting from highly unequal property ownership, the development process lowers inequality. History suggests, however, that this may happen only once. Redistribution toward the poor tends to happen least in those times and polities where it would seem most justified by the usual goals of welfare policy.

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Trends in the Size Distribution of Wealth in the Nineteenth Century: Some Speculations

Three centuries of inequality in britain and america

Income and wealth inequality rose over the first 150 years of US history. They rose in Britain before 1875, especially 1740–1810. The first half of the 20th century equalized pre-fisc incomes both in Britain and in America. From the 1970s to the 1990s inequality rose in both countries, reversing most or all of the previous equalization. Government redistribution explains part but not all of the reversals in inequality trends. Factor-market forces and economic growth would have produced a similar timing of rises and falls in income inequality even without shifts in the progressivity of redistribution through government. Redistribution toward the poor tends to happen least in those times and polities where it would seem most justified by the usual goals of welfare policy.

Chapter 3 Three centuries of inequality in Britain and America

Physical Growth as a Measure of the Economic Well-being of Populations: The Eighteenth and Nineteenth Centuries

In the vast literature on the distribution of income, relatively little systematic attention has been paid to the mutual influence of the distributions of income and wealth on each other, and to the impact of intergenerational grants on the entire process. The purpose of this essay is to utilize a simulation model in which the distributions of income and wealth are analyzed together. The model permits me to explore the influences of such socioeconomic variables as the pattern of intergenerational grants, the rules of inheritance, the patterns of mate selection, differential fertility of various income classes, and the patterns of governmental redistributions of income and wealth. So many simplifying assumptions must be made that the model, as it is presented below, cannot be directly used for determining the current size distribution of income and wealth; nevertheless, the results of the model suggest certain neglected factors, particularly the shape of the intergenerational savings function, that must be taken into account if we are to gain a clearer picture of the causal forces operating in the real world. The most important biases (mostly leading to greater income equality) arising from the simplifying assumptions of the model are also discussed below. To take all the major long-run factors influencing the size distributions of income and wealth into account is an extremely complicated matter, and we face two alternative research strategies; either we model these factors mathematically, which requires some drastic simplifications in order to keep the equation system solvable,' or we take more factors into account by simulating their impact. While the latter procedure does not lead to a completely general solution it does permit us to investigate certain features of economic systems using parameters of particular interest. To place this model in perspective, it is useful to note that variance of personal income can be derived from three sources; variances in the distribution of labor income, of property income, and of the interaction between these two variables.2 In this model, variations of labor income are handled by assigning everyone a lifetime income equal to the average lifetime in* Professor of economics, Swarthmore College. I wish to thank Howard Pack, J. Roland Pennock, Frank C. Pierson, Zora Pryor, and George Stolnitz for their helpful suggestions on an earlier draft. The research for this essay was financed by the International Development Research Center of Indiana University and was carried out at the Economic Growth Center of Yale Universitv. A considerable amount of difficult work was done by those who programmed this extremely complicated simulation model, and I would especially like to thank the chief programmer, Carol Hopkins. I would also like to express my apl)reciation to David Forman and Michael Hooven for assistance at particular points. 1 Such an approach is followed by Joseph Stiglitz anid, in a less formal fashion, by James Meade. 2 The higher the correlation between individual labor and property incomes, the more unequal the distribution of income. (See formula in fn. I1.) The correlation can, of course, be negative, a situation that apparently arose in mandarin China where receivers of property income made a special point of avoiding manual work, even if it meant a lifetime of poverty. (See Hsiao-Tung lFei.)

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Simulation Of The Impact Of Social And Economic Institutions On The Size Distribution Of Income And Wealth

Seventeenth and eighteenth century America saw relatively egalitarian and stable aggregate wealth concentration. During the first half of the nineteenth century, in contrast, there was a marked rise in wealth concentration. The period from the Civil War to the Great Depression was also one of stability in wealth concentration, but it was characterized by substantially greater inequality than had prevailed in the colonial era. During the second quarter of the twentieth century, wealth inequality again decreased so that inequality of wealth-holding today resembles what it was on the eve of the Declaration of Independence. Those who would argue, therefore, that the degree of wealth inequality i s some sort of eternal constant will be uncomfortable with the Williamson-Lindert findings.

Trends in the Size Distribution of Wealth in the Nineteenth Century: Some Speculations

Citations

Three centuries of inequality in britain and america

Chapter 3 Three centuries of inequality in Britain and America

Physical Growth as a Measure of the Economic Well-being of Populations: The Eighteenth and Nineteenth Centuries

Simulation Of The Impact Of Social And Economic Institutions On The Size Distribution Of Income And Wealth

Long-Term Trends in American Wealth Inequality

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