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This paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the United States using individual tax returns data. Top income and wages shares display a U-shaped pattern over the century. Our series suggest that the large shocks that capital owners experienced during the Great Depression and World War II have had a permanent effect on top capital incomes. We argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks. Top wage shares were flat before World War II, dropped precipitously during the war, and did not start to recover before the late 1960s but are now higher than before World War II. As a result, the working rich have replaced the rentiers at the top of the income distribution.

Just like economists, voters have conflicting views about redistributive taxation because they estimate its incentive costs differently. We model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs. In the long run, “left-wing dynasties” believing less in individual effort and voting for more redistribution coexist with “right-wing dynasties.” This allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries.

This paper uses data from income tax returns (1915–98), wage tax returns (1919–98), and inheritance tax returns (1902–94) in order to compute homogeneous, yearly estimates of income, wage, and wealth inequality for twentieth‐century France. The main conclusion is that the decline in income inequality that took place during the first half of the century was mostly accidental. In France, and possibly in a number of other countries as well, wage inequality has been extremely stable in the long run, and the secular decline in income inequality is for the most part a capital income phenomenon. Holders of large fortunes were badly hurt by major shocks during the 1914–45 period, and they were never able to fully recover from these shocks, probably because of the dynamic effects of progressive taxation on capital accumulation and pretax income inequality.

This paper develops a simple macroeconomic model that shows that combining capital market imperfections together with unequal access to investment opportunities across individuals can generate endogenous and permanent fluctuations in aggregate GDP, investment, and interest rates. Reducing inequality of access may be a necessary condition for macroeconomic stabilization. Moreover, countercyclical fiscal policies have a role to play: in our model savings are underutilized in slumps because of the limited debt capacity of potential investors. Therefore, the government should issue public debt during recessions in order to absorb those idle savings and finance investment subsidies or tax cuts for investors.

This paper summarizes the main findings and perspectives emerging from a collective research project on the dynamics of income and wealth distribution. The primary objective is to construct a high-quality, long-run, international database on income and wealth concentration, using historical tax statistics. In this database, the data are annual, long-run time series; they are fairly homogenous across countries; and they are also broken down by income source. Hence they offer a unique opportunity to understand the dynamics of income and wealth distribution and the interplay between inequality and growth.

With decreasing returns and first-best credit, the long-run interest rate and aggregate output are uniquely determined, and wealth dispersion among individuals or firms is irrelevant. Introducing credit rationing into the Solow model modifies these conclusions. Multiple stationary interest rates and wealth distributions can exist because higher initial rates can be self-reinforcing through higher credit rationing and lower capital accumulation. The wealth accumulation process is ergodic in every steady state, but wealth mobility is lower with higher steady-state interest rates. Aggregate output is higher in steady states with lower interest rates because credit is better allocated. Short-run interest rate or distribution shocks can be self-sustaining and can have long-run effects on output through the induced dynamics of the wealth distribution and credit rationing.

Using large samples of estate tax returns, we construct new series on wealth concentration in Paris and France from 1807 to 1994. Inequality increased until 1914 because industrial and financial estates grew dramatically. Then, adverse shocks, rather than a Kuznets-type process, led to a massive decline in inequality. The very high wealth concentration prior to 1914 benefited retired individuals living off capital income (rentiers) rather than entrepreneurs. The very rich were in their seventies and eighties, whereas they had been in their fifties a half century earlier and would be so again after World War II. Our results shed new light on ongoing debates about wealth inequality and growth.

This paper offers an overview of what we have learned from a collective research project on income distribution in the long run. Using historical income tax statistics and a common methodology, we have constructed annual top income shares series (often broken down by income source) for over 20 countries covering most of the 20th century. One important conclusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental, and does not seem to have much to do with a Kuznets‐type process. Top capital incomes were hit by major shocks during the 1914–1945 period, and were never able to fully recover from these shocks, probably because of the dynamic impact of progressive income and estate taxation. Our database also allows us to readdress the cross‐country analysis of the interplay between inequality and growth with better prospects than with standard databases. (JEL: D31)

This paper develops a model where voters trade-off two different motives when deciding how to vote: they care about current decision-making (they are “strategic”), but they also care about communicating their views about their most-preferred candidate so as to influence future elections, by influencing other voters' opinion and/or party positioning. In effect, voters in this model are intermediate between “strategic” and “sincere” voters of conventional models in elections with more than 2 candidates. This allows us to better investigate the relative efficiency of various electoral systems: our main conclusion is that since voting is used as a communication device electoral systems should be designed to facilitate efficient communication, e.g. by opting for 2-round systems rather than 1-round systems.

This article presents data on the evolution of top incomes and wages for 1922-2000 in India using individual tax return data. The data show that the shares of the top 0.01 percent, 0.1 percent, and 1 percent in total income shrank substantially from the 1950s to the early to mid-1980s but then rose again, so that today these shares are only slightly below what they were in the 1920s and 1930s. This U-shaped pattern is broadly consistent with the evolution of economic policy in India: From the 1950s to the early to mid-1980s was a period of \"socialist\" policies in India, whereas the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift toward more probusiness policies. Although the initial share of the top income group was small, the fact that the rich were getting richer had a nontrivial impact on the overall income distribution. Although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growth shown in National Sample Survey-based data and the national accounts-based data, it is sufficiently large to explain a nonnegligible part of it (20-40 percent).