Advanced
course « Economics of Inequality » (Master APE, M2 year)
Thomas Piketty
(EHESS,
Année universitaire/Academic year 2008-2009
Syllabus
(version 19/10/2008 ; weeks
1-8)
(relevant course material available
on-line at least one week before each course)
Campus Paris-Jourdan, 48 boulevard Jourdan, 75014 Paris, salle E101 (pavillon E)
Tuesday 9h30-12h30
23/9/2008, 30/9/2008,
7/10/2008, 14/10/2008, 21/10/2008, 28/10/2008, 4/11/2008, 18/11/2008
Email : piketty@ens.fr
Course web page : http://piketty.pse.ens.fr/fichiers/enseig/ecoineg/Syll2008-2009.htm
Le principal objectif de cours est de suggérer des pistes de recherches à des étudiants souhaitant mener des travaux en économie des inégalités (au sens large). Les étudiants cherchant un sujet pour leur mémoire de M2 sont invités à consulter l’ensemble des thèmes mentionnés dans cette liste de lectures et dans les listes de lecture des années précédentes.
The main objective of this course is to suggest
research topics to students wishing to work in inequality economics (broadly
defined). Students looking for a topic for their master dissertation are
requested to examine all areas covered in this syllabus, as well as in those of
previous years.
Teaching language. The course will be bilingual. The
primary teaching language will be French. However (1) all teaching material – course
notes as well as research papers – will be in English, and is available
on-line, so that non-French speaking students can easily prepare courses and
questions ; (2) non-French-speaking
students are encouraged to ask as many questions in English as they want, and I
will always answer in English; in effect, if the demand for English – as
measured by the number and frequency of questions in English – is sufficiently
strong, the course will switch almost entirely to English. The reasons for
keeping French as the default language are threefold: (1) it is much more fun
for me to teach in French, and this is one of the good things that convinced me
to return to France; (2) my English is really bad, and I think it is much more
productive for French-speaking students to hear me teach in French; (3) it
cannot be that bad for non-French-speaking students to learn a little bit of
French by the end of the course.
Course validation. There will be no formal exam. In
order to validate the course, students are required (1) to attend and actively
participate to all classes; (2) to send me by email before 10/1/2009 a “referee
report” (2-5 pages) on a research paper chosen in this syllabus (or in those of
the previous years); the report must be written in English and must provide a
crystal-clear summary of the original contribution of the paper, adequate
references to the relevant research literature to which this paper contributes,
and an assessment of the strength and weaknesses of the paper
Course material. Some of the course material –
primarily course notes and selected tables and graphs extracted from key
references – will be distributed in hard copies during each class. This
corresponds to “HC” material in the following reading list. However most of the
material will not be distributed in hard copies and will solely be available in
electronic format on-line. Students are requested to read (and print if they so
wish) this supplementary material before the class. Two-star references ** are
compulsory reading. One-star references * are highly recommended. Other
references provide useful readings for students wishing to explore the specialized
literature in the relevant area, but will not be presented in a detailed manner
during the class.
General references on
the economics of inequality :
A.B. Atkinson, The
economics of inequality, Clarendon Press, 1983
A.B. Atkinson et F.
Bourguignon (éd.), Handbook of Income Distribution, North-Holland, 2000
* A.B. Atkinson et T. Piketty (éd.), Top incomes
over the twentieth century : a contrast between continental european and
english-speaking countries,
D. G. Champernowne
and F. Cowell, Economic Inequality and Income Distribution,
T. Piketty, L’économie des inégalités, éditions
* T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001
B. Salanié, Théorie économique de la fiscalité, Economica, 2002
General references on
empirical methods used by many papers in the reading list (see courses 4-8):
J. Angrist et A.
Krueger, "Instrumental Variables and the Search for Identification: From
Supply and Demand to Natural Experiments," Journal of
Economic Perspectives, 15 (4) (2001), pp. 69-87
M. Bertrand,
* E. Duflo, « Empirical Methods », mimeo MIT, 2002 [article
en format pdf]
Part 1 : Income and Wealth
Distribution – Models and facts
** Course Notes A : Basic Models of Inequality – Capital vs Labor – Road
Map of the Course
[Course
Notes A (in html format)] HC
** National Income and Capital Accounts
[Tableau économique d'ensemble, TEE, France 2007 (in excel format)]
[Selected tables in pdf
format] HC
(i) Warning :
be careful with data sources
Income and
wealth surveys (in
On French surveys (codebooks and files), see
Link toward Centre Maurice Halbwachs
Primary sources vs
secondary sources.
On the danger of
secondary data sets on inequality, see:
* A.B. Atkinson et A.
Brandolini, « Promise and Pitfalls in the Use of « Secondary »
Data-Sets : Income Inequality in OECD Countries as a Case Study », Journal
of Economic Literature 39 (September 2001), pp.771-799 [article in pdf format]
A. Banerjee et
K. Deininger et L.
Squire, « A New Data Set Measuring Income Inequality », World Bank
Economic Review 10 (3) (1996), pp.565-591 [Deininger-Squire
data set]
(ii) Sources and
methods to estimate top incomes: income tax tabulations and Pareto
interpolations
** Exemple of pre-electronic primary data source: tabulations based upon
French 1919 income tax returns
[tables
1919 (published in BSLC 1923) in pdf format] HC
** Course Notes B : Pareto
interpolation techniques for income and wealth distribution
[Course Notes B (in html format)]
HC
(iii) Results on top income shares in the long run: the end of rentiers
A.B. Atkinson et T. Piketty (éd.), Top incomes over
the twentieth century : a contrast between continental european and
english-speaking countries,
A.B. Atkinson, « Top Incomes in the
A.B. Atkinson et W. Salverda, « Top Incomes in the Netherlands and
the United Kingdom over the Twentieth Century », mimeo, Nuffield College,
2003 [article
in pdf format]
F. Dell, “Top Incomes in
F. Dell, T. Piketty et E. Saez, “Income and Wealth Concentration in
** C. Landais, "Les hauts revenus en France (1998-2006): Une explosion des inégalités ?", Mimeo, Paris School of Economics, 2007 [article in pdf format]
[Selected
tables in pdf format] HC
T. Piketty, « Les
inégalités dans le long terme », in Inégalités économiques, Rapport
du Conseil d’Analyse Economique n°33 (juin 2001), La documentation française [article
in pdf format]
** T. Piketty, « Income Inequality in
[Selected
tables in pdf format] HC
** T. Piketty et
[Selected
tables in pdf format] HC
E. Saez et M. Veall, « High Incomes in
(i) Results on top wealth shares and wealth/income ratios in the long
run
** W. Kopczuk et E. Saez, « Top Wealth Shares in the United States,
1916-2000 – Evidence from Estate Tax Returns », mimeo, Columbia et
Berkeley, 2003 [article
in pdf format]
[Selected
tables in pdf format] HC
** T. Piketty, G. Postel-Vinay et J.L.
Rosenthal, “Wealth Concentration in a Developping Economy: Paris and France,
1807-
[Selected
tables in pdf format] HC
* J. Roine and D. Waldenstrom, “Wealth Concentration over the Path of
Development:
[Selected
tables in pdf format] HC
** T. Piketty, “Wealth-income ratios in the
very long run”, work in progress, 2008
[Selected
tables in pdf format] HC
(ii) Results on current wealth trends
* A. Atkinson, “Concentration Among the Rich”, mimeo, 2006 [article in
pdf format]
* J. Davies, S. Sandstrom, A. Shorrocks and E.
Wolff, “The World Distribution of Household Wealth”, mimeo 2006 [article
in pdf format]
* « Global Wealth and Global Millionnaires 2006 », Boston
Consulting Group 2006 [article
in pdf format]
* T. Smeeding and J. Thompson, “Income from
Wealth and Income from Labor: Stocks, Flows, and More Complete Measures of
Well-Being”, mimeo 2006 [article
in pdf format]
* M. Cagetti and M. DeNardi, “Wealth Inequality: Data and Models”, NBER
Working Paper 12550, 2006 [article
in pdf format]
* D. Krueger and A. Ludwig, “On the Consequences of Demographic Change
for Rates of Return to Capital, and the Distribution of Wealth and Welfare”,
NBER Working Paper 12453, 2006 2006 [article
in pdf format]
* D. Fiaschi et M. Marsili, « The Distribution of Wealth :
Theoretical Microfoundations and Emirical Evidence », mimeo 2007, [article
in pdf format]
* Zucman, G., “Les hauts
patrimoines fuient-ils l’ISF? Une estimation sur la période 1995-2006 », [article in pdf format]
(iii) Some theory
** Course Notes C : Top labor
incomes vs Top capital incomes: Which are the richest?
[Course Notes C (in html format)]
HC
Part
2 : Optimal redistributive taxation and other policy responses
Week 5: Optimal
redistributive taxation of labor income
(i) Observed patterns of marginal vs average tax rates on labor income
** Income tax schedule (France 2008)
[tax schedules in excel format] HC
(ii) Theoretical models of optimal labor income tax rates
** Course Notes D : Optimal
redistributive taxation of labor income
[Course Notes D (in html format)]
HC
Mirrlees, J.,
"An exploration in the theory of optimum income taxation", Review
of Economic Studies 38 (1971), 175-208.
P. Diamond, “Optimal Income
Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Rates”, American
Economic Review 88 (1998), 83-95 [article
en format pdf]
* E. Saez, “Using Elasticities to Derive Optimal Income Tax Rates”, Review
of Economic Studies 68 (1) (2001),
pp.205-229 [article
en format pdf]
T. Piketty, « La
redistribution fiscale face au chômage », Revue française d’économie
12 (1) (hiver 1997), pp.157-201 [article
en format pdf]
(iii) Empirical estimates of high-income labor supply elasticity
** M. Feldstein, “The Effect of Marginal Tax
Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act”, Journal
of Political Economy 103 (1995), 551-572 [article
en format pdf]
[selected
tables in pdf format] HC
A. Goolsbee, “What Happens When You
Tax the Rich? Evidence from Executive Compensation”, Journal of Political
Economy (April 2000) [article
en format pdf]
A. Goolsbee, “Evidence on the High-Income Laffer Curve from Six Decades
of Tax Reform”, Brookings Papers on Economic Activity 1999:2.
R.H. Gordon et J. Slemrod, “Are
“Real” Responses to Taxes Simply Income Shifting Between Corporate and Personal
Tax Bases?”, in Does
Atlas Shrug? – The Economic Consequences of Taxing the Rich, édité par J.B.
Slemrod, Harvard University Press, 2000 [article
en format pdf]
J. Gruber et
* T. Piketty, “Les hauts
revenus face aux modifications des taux marginaux supérieurs de l’impôt sur le
revenu en France, 1970-
E. Saez, “Reported Incomes and Marginal Tax Rates, 1960-2000 :
Evidence and Policy Implications”, mimeo,
(iv) Empirical estimates of low-income labor supply elasticities
* B. Dormont, D. Fougère et
A. Prieto, « L’effet de l’allocation unique dégressive sur la reprise
d’emploi », mimeo, CREST, 2001 [article
en format pdf]
* B. Meyer et D. Rosenbaulm, « Welfare, the Earned Income Tax
Credit, and the Labor Supply of Single Mothers », Quarterly Journal of
Economics 116 (3) (August 2001), pp.1063-1114 [article
en format pdf]
* T. Piketty, “L’impact de l’allocation
parentale d’éducation sur l’activité féminine et la fécondité, 1982-
[selected tables in pdf format]
(iv) Empirical estimates of labor demand elasticities
D. Acemoglu at J. Angrist, “Consequences of Employment Protection? The
Case of the Americans with Disabilities Act”, Journal of Political Economy
109(5) (2001), pp.915-957 [article
en format pdf]
J. Gruber, “The Incidence of Mandated Maternity Benefits”, American
Economic Review 84(3) (1994), pp.622-641 [article
en format pdf]
F. Kramarz et T. Philippon, « The Impact of Differential Payroll
Tax Subsidies on Minimum Wage Employment », Journal of Public Economics
82 (1) (October 2001), pp.115-146 [article
en format pdf]
K. Lang, “The Effect of Payroll Tax on Earnings: A Test of Competing
Models of Wage Determination”, NBER Working Paper 9537 (2003) [article
en format pdf]
Week 6: Optimal
redistributive taxation of capital and capital income
(i) Overview of the various types of capital and capital income taxes
** Tax schedules for Wealth Tax (ISF) and Estate
tax (France 2008)
[tax schedules in excel format] HC
** T.
Piketty et E. Saez, « How progressive is the
[selected tables in pdf format] HC
** T. Piketty, « Wealth taxation in the
21st century: a personal view », In : Reforming the Tax System for
the 21st Century: The Mirrlees Review,
A. Auerbach, « The Future of Capital Taxation », mimeo,
2006 [article
in pdf format]
(ii) Basic theoretical result 1: without inheritance, and with perfect
capital markets, optimal k tax = 0%
Intuition: if 100% of capital accumulation comes from lifecycle savings,
then taxing capital or capital income is equivalent to using differential
commodity taxation (current consumption vs future consumption);
Atkinson-Stiglitz: under fairly general conditions (separable preferences),
differential commodity taxation is undesirable, and the optimal tax structure
should rely entirely on direct taxation
(to put it differently: if inequality entirely comes from labor income
inequality, then it is useless to tax capital; one should rely entirely on the
redistributive taxation of labor income)
Papers on optimal indirect taxation:
A.B. Atkinson and J. Stiglitz, “The design of tax structure: direct vs
indirect taxation”, Journal of Public Economics 6 (1976), 55-75
V.
Christiansen, « Which Commodity Taxes Should Supplement the Income
Tax ? », Journal of Public Economics 1984 [article
en format pdf]
Papers on relative importance of inheritance vs lifecycle savings in
capital accumulation:
Aggregate estimates:
Kotlikoff, L and L. Summers, “The Role of Intergenerational Transfers in
Aggregate Capital Accumulation”, Journal of Political Economy 89 (1981),
706-732 [article
in pdf format]
Kotlikoff, “Intergenerational Transfers and Savings”, Journal of Economic Perspectives 1988 [article
in pdf format]
Modigliani, F. « The Role of Intergenerational Transfers and
Lifecyle Savings in the Accumulation of Wealth », Journal of Economic Perspectives 1988 [article
in pdf format]
D. Kessler and A. Masson, “Bequest and Wealth
Accumulation: Are Some Pieces of the Puzzle Missing?”, Journal of Economic
Perspectives 1989 [article
in pdf format]
Micro-based estimates:
A. Atkinson, The
economics of inequality, Clarendon Press, 1983, pp.174-177
J. Benhabib and S. Zhu, “Age, Luck and
Inheritance”, mimeo 2008 [article
in pdf format]
A. Castaneda, J. Dias-Gimenes and V. Rioss-Rull, “Accounting for the
U.S. Earnings and Wealth Inequality”, Journal of Political Economy, 2003 [article in pdf format]
C. Caroll, “Why Do the Rich Save So Much?”, 2000 [article
in pdf format]
K. Dynan, J. Skinner, S. Zeldes, “Do the Rich
Save More?”, Journal of Political Economy 2004 [article
in pdf format]
W. Kopczuk, “Bequest and Tax Planning: Evidence from Estate Tax
Returns”, Quarterly Journal of Economics 2007 [article
in pdf format]
K. Charles et
A. Bjorklund, J.
Roine, D. Waldenstrom, “Intergenerational income mobility in
(iii) Basic theoretical result 2: with infinite-horizon dynasties,
optimal linear k tax = 0%, but optimal progressive k tax > 0%
** Course Notes E : Optimal
redistributive taxation of capital and capital income
[Course Notes E (in html format)]
HC
R. Lucas,
“Supply Side Economics: An Analytical Review”, Oxford Economic Papers
1990 [article
in pdf format]
(iv) Basic result 3: with imperfect k markets, optimal k tax > 0%
C. Chamley, “Capital Income Taxation, Wealth Distribution and Borrowing
Constraints”, Journal of Public Economics 79 (1) (January 2001),
pp.55-70 [article
en format pdf]
A. Banerjee et A. Newman (1993), « Occupational Choice and the
Process of Development », Journal of Political Economy 101 (1993),
pp.274-299 [article
en format pdf]
T. Piketty (1997), “The Dynamics of the Wealth Distribution and the
Interest Rate with Credit Rationing”, Review of Economic Studies [article in pdf format]
* Aghion P., Banerjee A., Piketty T. : « Dualism
and macroeconomic volatility », Quarterly journal of economics,
vol. 114, no 4, 1999, p. 1359-1397 [article in pdf format]
(v) Other recent papers on capital
taxation
On capital taxation and governance:
M. Desai, A. Dyck, L. Zingales, « Theft and Taxes », Journal
of Financial Economics, 2006 [article
in pdf format]
R. Morck, “Why Some Double Taxation Might Make Sense: The Special Case
of Inter-Corporate Dividends”, NBER Working Paper 9651 (2003) [article
in pdf format]
On informational rationales for taxing capital income:
H. Cremer, P. Pestieau et J.C. Rochet, “Capital Income Taxation when
Inherited Wealth is Not Observable”, Journal of Public Economics 87
(2003), 2475-2490 [article
en format pdf]
R. Gordon, « Taxation of Interest Income », NBER Working Paper
9503 (2003) [article
en format pdf]
On private vs social discounting and negative capital taxation:
E. Farhi and I. Werning, “Progressive Estate Taxation”, mimeo 2008 [article
in pdf format]
On optimal capital taxation without commitment:
E. Farhi and I Werning, “The Political Economy of Non-Linear Capital
Taxation”, mimeo 2008 [article
in pdf format]
On inflationary capital tax:
M. Doepke and M. Schneider, Inflation and the Redistribution of Nominal
Wealth, Journal of Political Economy, 2006 [article
in pdf format]
Week 7: Wealth
inequality, financial intermediation and efficiency
(i) Family wealth transmission
and economic efficiency
** M. Bennedsen, F. Peres-Gonzalez, K. Nielsen and D. Wolfenzon, “Inside
the Family Firm: The Role of Families in Succession Decisions and Performance”,
Quartely Journal of Economics 2007
[article
in pdf format]
[selected
tables in pdf format] HC
* J. Brown, C. Coile, and S. Weisbenner, “The Effect of Inheritance
Receipt on Retirement”, NBER Working Paper 12386, 2006 [article
en format pdf]
F. Caselli et N. Gennaloll, « Dynastic Management », Bread
Working Paper 15 (2003) [article
en format pdf]
D. Holtz-Eakin, D. Joulfaian et H.S. Rosen, « The Carnegie
conjecture : some empirical evidence », Quarterly Journal of
Economics 108 (May 1993), pp.288-307 [article
en format pdf]
R.K. Morck, D.A. Strangeland et B. Yeung, « Inherited Wealth,
Corporate Control and Economic Growth: the Canadian Desease? », in R.K.
Morck, Concentrated Capital Ownership, NBER/University of
* F. Pérez-Gonzalez, “Inherited Control and Firms’ Performance”, American
Economic Review, 2006 [article
in pdf format]
* L. Bach, “Family CEO Successions and Firms Brankruptcies
– Evidence from
* V. Grossmann and H. Strulik, “Should
Continued Family Firms Face Lower Taxes Than Other Estates?”, mimeo 2008 [article in pdf format]
(ii) Empirical estimates of capital market
imperfections and credit constraints
O. Lamont, “Cash Flow
and Investment: Evidence from Internal Capital Markets”, Journal of Finance
52 (1997), 83-109 [article
in pdf format]
* A. Banerjee et E. Duflo, “Do Firms Want to Borrow More ? Testing
Credit Constraints Using a Directed Credit Programme”, mimeo, MIT, 2002 [article
en format pdf]
* L. Bach, “Are small and medium-sized firms credit-constrained?
Evidence from a French targeted credit programme”, mimeo 2007 [article
in pdf format]
S. De Mel, C. McKenzie, D. Woodruff, “Returns to Capital in
MicroEntreprises: Evidence from a Field Experiment”, Quarterly Journal of
Economics 2008 [article
in pdf format]
(iii) Corporate
governance and CEO pay
** M. Bertrand et S. Mullainathan, “Do CEOs Set Their
Own Pay ? The Ones Without Principals Do”, Quarterly Journal of
Economics 116 (3) (August 2001), pp.901-932 [article
in pdf format]
[selected
tables in pdf format] HC
** X. Gabaix and A. Landier, “Why Has CEO Pay Increased so
Much?”, Quarterly Journal of Economics 2008 [article
in pdf format]
[selected
tables in pdf format] HC
Week 8 : Inequality of human capital, educational investments,
family structure
Although this course puts primary emphasis on
the capital side, opening up the labor side/human capital/family structure
black box is also very important. The references below offer starting points to
explore the relevant literature.
(i) Estimating the returns to education using
natural experiments
** J. Angrist et A. Krueger, “Does Compulsory
School Attendance Affect Schooling and Earnings?”, Quarterly Journal of
Economics 106(4) (1991), pp.979-1014 [article
en format pdf]
A. Björklund, M. Lindahl et E. Plug, “Intergenerational Effects in
* E. Duflo, “Schooling and Labor Market Consequences of School
Construction in
J. Grenet, « Suffit-il
d’allonger la scolarité obligatoire pour augmenter les salaires ? Le cas
de la réforme Berthoin », mimeo PSE, 2003 [article en format pdf]
(ii) Opening up the black box of the
educational production function : class size and teacher pay
* J. Angrist et V. Lavy, “Using Maimonides’ Rule to Estimate the Effect
of Class Size on Student Achievement”, Quarterly Journal of Economics
114(2) (1999), pp.533-574 [article
en format pdf]
*
Piketty, T., « L’impact de la taille des classes et de la ségrégation
sociale sur la réussite scolaire dans les écoles françaises: une estimation à
partir du panel primaire 1997 », mimeo 2004 [article
en format pdf]
* P. Glewwe, N. Ilias et M. Kremer, « Teacher Incentives »,
NBER Working Paper 9671 (2003) [article
en format pdf]
* V. Lavy, “Paying for Performance: The Effect of Financial Incentives
on Teachers’ Effort and Students’ Scholastic Outcomes”, mimeo,
(iii) Opening up the black box of the
educational production function : peer effects, zoning
J. Angrist, « How Important Are Classroom Peer Effects ?
Evidence from
S. Black, « Do Better Schools Matter ? Parental Valuation of
Elementary Education”, Quarterly Journal of Economics 114(2) (1999),
pp.577-599 [article
en format pdf]
** G. Fack and J. Grenet, “Do Better Schools
Raise Housing Prices? Evidence from
E. Gould, V. Lavy et D. Paserman, “Immigrating to Opportunity –
Estimating the Effect of School Quality Using a Natural Experiment on Ethiopans
in Israël”, CEPR Discussion Paper 4052 (2003) [article
en format pdf]
B. Sacerdote, “Peer Effects with Random Assignment: Evidence from
Dartmouth Roommates”, Quarterly Journal of Economics 2001 [article
en format pdf]
(iv) Opening up the black box of the
educational production function : higher education and tuition fees
** P. Garibaldi, F. Giavazzi, A. Ichino and
* D. Linsenmeier, H. Rosen et C.E. Rouse, “Financial Aid Packages and College
Enrollment Decisions: An Econometric Case Study”, NBER Working Paper 9228 (2003) [article
en format pdf]
* B. Terry Long, “The Impact of Federal Tax Credits for Higher Education
Expenses”, NBER Working Paper 9553 (2003) [article
en format pdf]
(v) Opening up the family black box :
intra-household inequality and educational investments
* S. Aura, “Does the Balance of Power Within a Family Matter? The Case
of the Retirement Equity Act”, mimeo, 2001, MIT [article
en format pdf]
** J. Ekberg, R. Eriksson and G. Friebel,
“Parental Leave – A Policy Evaluation of the Swedish “Daddy-Month” Reform”,
mimeo 2006 ) [article
en format pdf]
** J. Angrist et W. Evans, “Children and Their
Parents’ Labor Supply : Evidence from Exogenous Variation in Family Size”,
American Economic Review 88(3) (1998), pp.450-476 [article
en format pdf]
** J. Angrist, V. Lavy et A. Schlosser, “New
Evidence on the Causal Link Between the Quantity and Quality of Children”, NBER
Working Paper 11835, 2005 [article
en format pdf]
** C. Pop-Eleches, “The Impact of an
Abortion Ban on Socioeconomic Outcomes of Children: Evidence from