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'Growth is (Really) Good for the (Really) Rich'

El Colegio de Mexico Center for Economic Studies Working Paper No. 9

55 Pages Posted: 27 Dec 2013  

Raymundo M. Campos-Vazquez

El Colegio de Mexico - Centro de Estudios Economicos

Emmanuel Chavez

Paris School of Economics, Students

Gerardo Esquivel

El Colegio de Mexico - Centro de Estudios Economicos

Date Written: December 1, 2013

Abstract

This paper analyzes the relationship between mean income and the income of the rich. Our methodology closely follows that of Dollar and Kraay (2002), but instead of looking at the bottom of the distribution, we analyze the top. We use panel data from the World Top Incomes database, which collects top income data from several countries using tax returns as the raw source. We define the “rich” as earners in the top 10 percent, 1 percent, 0.1 percent, and 0.01 percent of the income distribution. We find that economic growth is good for the rich in the sense that the mean income of the top decile of the distribution grows in the same proportion as that of the whole population. However, we also find that the income of earners in the top percentile of the distribution and above grows in an even larger proportion than average income: that is, economic growth is really good for the really rich. We also find that during economic downturns, the average income of top earners responds proportionally less to changes in mean income than during economic expansions. Our results are robust to different sample specifications.

Keywords: Growth; Income distribution; Inequality; Top Income; Rich

JEL Classification: D31; D63; E01; I30; O40

Suggested Citation

Campos-Vazquez, Raymundo M. and Chavez, Emmanuel and Esquivel, Gerardo, 'Growth is (Really) Good for the (Really) Rich' (December 1, 2013). El Colegio de Mexico Center for Economic Studies Working Paper No. 9. Available at SSRN: https://ssrn.com/abstract=2371892 or http://dx.doi.org/10.2139/ssrn.2371892

Raymundo M. Campos-Vazquez (Contact Author)

El Colegio de Mexico - Centro de Estudios Economicos ( email )

Camino al Ajusco 20
Col. Pedregal de Santa Teresa
Mexico DF 10740
Mexico

Emmanuel Chavez

Paris School of Economics, Students ( email )

Paris
France

Gerardo Esquivel

El Colegio de Mexico - Centro de Estudios Economicos ( email )

Camino al Ajusco 20
Col. Pedregal de Santa Teresa
Mexico DF 10740
Mexico
+52 55 5449-3000 x50031 (Phone)
+52 55 5645-0464 (Fax)

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