Thread by @michael_stiefel

Looking forward to this livestream of the #UBSCenterForum this afternoon to learn more about recent trends in income and health inequality and their ultimate causes

https://twitter.com/ubscenter/status/1321239732827901952

.@jmackin2 begins the panel discussion by highlighting the different dimensions in which the covid pandemic affects inequality. The effect on income inequality is not obvious, but, by and large, low income (service) jobs are more affected than white collar jobs

.@BrankoMilan focuses on global inequality from a long-run perspective in his intro statement. He distinguishes between and within country inequality. In the so-called third period, the rise of Asia leads to a decrease in global inequality.

In more recent data, it still seems that the global middle class experiences higher growth, while Western middle classes hardly experience any improvement. The top income shares see higher growth than the middle class but interestingly on a subdued level.

The famous elephant graph still seems to be there but with a slower growth rate for the top vox.com/policy-and-pol… s

Janet Currie explores the differences in mortality by different age and income groups. In general, both mortality and the degree to which mortality varies by income have fallen over the last three decades. However, the prime age group (20-49 years) has seen increasing mortality

The last fact seems to stem from the opioid epidemic. Comparing outcomes in France and the US, mortality is lower in France, and also the variation in mortality by income groups is lower in France.

David Dorn compares recent income trends between Switzerland and the US. The median person in the income distribution has seen a similar trend in both countries, but at the extremes of the distribution, the differences are striking:

The low income groups (10th percentile) started from a higher level in Switzerland and have experienced a similar growth rate than the median group, while the low income groups have actually seen a decrease in the US.

At the top of the income distribution, however, the highest group in the US has outgrown the highest group in Switzerland.

.@BrankoMilan argues that there are three major areas to tackle income inequality in the US: technological change, globalization and policy. He argues that the scope of policy actions is constrained, however.

Janet Currie, on the other hand, believes that there is a policy choice by highlighting developments in Europe caused by different social and tax policies. One reason could be the heterogeneity in the US that seems to prevent a consensus on redistribution.

David Dorn talks about his research on superstar firms. If a few large firms gain very high profits, those profits go to the owners of the firms which are mostly the rich.

Janet Currie discusses when there is too much inequality. She argues that there is too much inequality, when there is a group that can separate themselves from a deteriorating public service (say through private hospitals, schools or donations).

David Dorn emphasizes that the threshold - when inequality is clearly harmful - is reached when some large income groups cannot profit anymore from the overall growth in the country, like in the US at the moment. He thinks that direct democracy (like in CH) could help.

.@jmackin2 asks @BrankoMilan whether inequality can be self-perpetuating (university graduates marrying other university graduates and sending their children to private schools)

.@BrankoMilan agrees that this form of "aristocracy" is a threat to social mobility. He also highlights that the assortative matching between high income and high education groups might be a good development in general, but makes policy decisions very difficult.

David Dorn emphasizes that the covid pandemic might increase inequality also between age groups if the young currently entering the job market face huge barriers and a delayed entry.

In the Q/A-part, David Dorn and Janet Currie argue that the tax and transfer system has historically played a huge role in shaping wealth inequality. Higher taxation of capital could bring wealth inequality down.

Janet Currie argues that one should distinguish basic care and health care as a consumption good. Everyone should get the care they need, but if someone wishes to access and pay for special health care, this should still be possible.

David Dorn explores the causes why income inequality has not risen in Switzerland as much as it did in the US. One factor is the vocational training which results in highly skilled work (craftsmen) and is rewarded with higher wages.

He also mentions that there is a risk of too high university enrollment, and one should be cautious with a general policy recommendation to increase university enrollment rates and instead focus on the quality of the education.

About zombie firms, David Dorn says the question should not be whether those firms exist (they likely do) but that policies preserve the general economic structure so that healthy firms do not go bankrupt now.