Growth, the Rich, and the Really Rich - Part 1

Gerardo Esquivel is a Professor of Economics at El Colegio de Mexico.

While economic growth and the poor — do rising tides raise all boats? — has long been a major concern of economists, few have worried about growth and the rich. Yet there is an increasing concern, especially in industrial countries, about rising inequality within societies. Witness the numerous social movements in recent years, like Occupy Wall Street, which called attention to the fate of the "bottom 99 percent" versus the top 1 percent. A new paper, "Growth is (really) good for the (really) rich" — by Emmanuel Chavez (Economic Analyst, Mexico's Ministry of Finance and Public Credit) and Raymundo M. Campos-Vazguez and Gerardo Esquivel (Professors of Economics, El Colegio de Mexico) — tries to help inform the debate by asking how overall economic growth affects the "rich" (top 10 percent) and the "very rich" (top 1 percent, 0.1 percent, and 0.01 percent). It looks at 26 developed countries and emerging economies from 1980 to 2011, drawing on the World Top Incomes database.

In Part 1 of this series, Esquivel tells the JKP that the study finds that economic growth is good for the rich in the sense that the mean income of the top 10 percent grows in the same proportion as that of the whole population. However, it also shows that the "very rich" get even progressively bigger gains from growth. He says that many people have long assumed that the top 1 percent was reaping far more benefits than others from growth, but now we have empirical proof across countries over a long period of time. (Part 2 will look at the study's policy implications.)

This post was first published on the Jobs Knowledge Platform.