The "law" of wealth concentration

Doug Henwood dhenwood at panix.com
Wed Aug 16 12:36:19 PDT 2000


Carl Remick quoted:


>Every country in the world has a few rich people and then a long
>tail of poorer and poorer people. In fact, not only does a
>filthy-rich minority always hog most of the wealth, but the
>mathematical form of the distribution is the same everywhere.

"Almost the same" is a bit overstated. I'm curious what data they use on wealth distribution, since there's not much in the way of internationally comparable data. There is with income distribution, the Luxembourg Income Study, and there are some differences between countries that are less trivial than this piece would lead you to believe.

For example, I just happened to be reading a study by Chicago Fed economists comparing income distribution in five countries <http://www.frbchi.org/pubs-speech/publications/periodicals/ep/2000/2qep1.pdf>. In the U.S., the income of a household (after taxes and transfers) at the 80th percentile is 9 times that of one at the 20th. In Canada, it's 6; in Germany, 5; in Sweden and FInland, 4. Those aren't minor differences.

Apropos of a thread the other day, the article also makes the point that the U.S. has the most progressive income tax of the 5 countries, with Sweden and Finland having a near-proportional (flat) income tax. But the tax system has only a minor effect on the distribution of after-tax income; what matters is the transfer system. Nathan had a hard time believing this, but it's right there in black & white.

Doug



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