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1. Place-based Policies and Household Wealth in Africa

Author:
Matthew Amalitinga Abagna, Cecília Hornok, and Alina Mulyukova
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper provides empirical evidence on the impact of a prominent place-based policy - Special Economic Zones (SEZs) - on the economic well-being of African households. We compile a novel dataset on repeated cross-sections of households living in various distance bands around SEZs in 10 African countries over the period of 1990 to 2020. Exploiting time variation in SEZ establishment, the estimation yields that households in the vicinity of SEZs become significantly wealthier compared to the national average after SEZs are established. The effect is most pronounced for households within 10 km and decays rapidly with distance. We show that this result is not driven by the residential sorting of wealthier households in SEZ neighbourhoods. The rise in wealth is strongest towards the middle of the wealth distribution and goes hand in hand with increased access to household utilities, higher consumption of durable goods, higher levels of education, and a shift away from agricultural activities - patterns that we interpret as indicative of an urbanization trend and the strengthening of the middle class.
Topic:
Migration, Economic Growth, Special Economic Zones, Labor Market, Wealth, Opportunity, and Household Income
Political Geography:
Africa

2. The Incidence, Costs, and Correlates of High-Cost, High-Risk Consumer Credit Among Black and Latino Households

Author:
Edwith Theogene and Christian E. Weller
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Black and Latino households regularly have a lot less wealth than white households. Many people of color, mainly Black and Latino households, also often have to resort to more costly and risky debt than is the case for white households. We present data from FINRA’s nationally representative 2021 Financial Capability Survey on the distribution of various forms of household credit by race and ethnicity. The data show that incidences of high-cost, high-risk consumer credit is higher among Black and Latino households than among white households. Loan denials, credit market discrimination and credit steering all factors likely contributing to this greater incidence. Further, the costs associated with those forms of credit are also higher for Black and Latino households than they are for white households, even within the same types of credit. Finally, these forms of credit correlate with lower savings, especially among Black and Latino households. The results indicate that the more widespread incidence of consumer credit among Black and Latino households likely contributes to the persistence of the racial wealth gap.
Topic:
Race, Inequality, Discrimination, Credit, Wealth, and Consumer Credit
Political Geography:
North America and United States of America

3. Daring to Struggle: China's Global Ambitions Under Xi Jinping

Author:
Bates Gill and Elizabeth Wishnick
Publication Date:
04-2023
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
Daring to Struggle focuses on six increasingly important interests for today's China—legitimacy, sovereignty, wealth, power, leadership and ideas—and details how the determined pursuit of them at home and abroad profoundly shapes its foreign relationships, contributing to a more contested strategic environment in the Indo-Pacific region and beyond.
Topic:
Sovereignty, Leadership, Legitimacy, Xi Jinping, Strategic Interests, Power, and Wealth
Political Geography:
China and Asia

4. Federal Reserve Anti-Inflation Policy: Wealth Protection for the 1%?

Author:
Aaron Medlin and Gerald Epstein
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The Federal Reserve has a dual mandate from Congress that directs it to conduct monetary policy as such to achieve “maximum employment” and “stable prices.” Yet the U.S. central bank typically chooses to address inflation as a top priority and focuses on employment only secondarily, if at all. Why? In this paper we argue that an important reason is that the Federal Reserve conducts policy so as protect the real wealth of the top 1% of the wealth distribution. We focus on the Fed’s fight against inflation in 2021-2022, when it rapidly raised its policy interest rates by almost 4 percentage points in the face of more than 6 percent inflation. Using a novel econometric analysis, we provide evidence that shows that this policy serves as a real net wealth protection policy for the 1% by restoring some of the lost wealth that they would otherwise lose due to unexpected inflation. The results of this policy for the top 10% of the wealth distribution are econometrically ambiguous. But to the extent that the Fed’s high interest rates generate higher unemployment or even a recession, this wealth protection for the 1% could have serious income costs for workers who find themselves or another member of their household out of a job.
Topic:
Political Economy, Monetary Policy, Inflation, Elites, and Wealth
Political Geography:
North America and United States of America

5. Top Wealth and Its Historical Origins: An Analysis of Germany’s Largest Privately Held Fortunes in 2019

Author:
Daria Tisch and Emma Ischinsky
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
Rising wealth inequality is both a topic in recent policy discussion and in the social sciences. Despite the general interest in wealth concentration, we know only little about the largest privately held fortunes. To help fill this gap we analyze the historical origins of Germany’s 1,032 largest fortunes in 2019. In particular, we identify the share of entrenched fortunes – fortunes which date back to the beginning of the twentieth century – and ask to what extent they differ from more recently established ones. Furthermore, we examine in an exploratory way if entrenched fortunes are connected to fortunes with more recent origins through family lines. We use a journalistic rich list published by the manager magazin in 2019, which we link with both rich lists from 1912/1914 and Wikidata. We find that about eight percent of today’s fortunes can be traced back to fortunes held by the same families in 1913. Regression analyses show that entrenched fortunes rank on average higher on the rich list than the remaining ones. Descriptive network analyses indicate that some of today’s largest fortunes are intertwined through marital lines, hinting at social closure at the top. Our findings indicate that the accumulation and perpetuation of fortunes over many generations is an important feature of top wealth in Germany.
Topic:
Inequality, Family, Elites, Wealth, Inheritance, and Network Analysis
Political Geography:
Europe and Global Focus

6. Top Wealth and Its Historical Origins: An Analysis of Germany’s Largest Privately Held Fortunes in 2019

Author:
Daria Tisch and Emma Ischinsky
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Rising wealth inequality is both a topic in recent policy discussion and in the social sciences. Despite the general interest in wealth concentration, we know only little about the largest privately held fortunes. To help fill this gap we analyze the historical origins of Germany’s 1,032 largest fortunes in 2019. In particular, we identify the share of entrenched fortunes – fortunes which date back to the beginning of the twentieth century – and ask to what extent they differ from more recently established ones. Furthermore, we examine in an exploratory way if entrenched fortunes are connected to fortunes with more recent origins through family lines. We use a journalistic rich list published by the manager magazin in 2019, which we link with both rich lists from 1912/1914 and Wikidata. We find that about eight percent of today’s fortunes can be traced back to fortunes held by the same families in 1913. Regression analyses show that entrenched fortunes rank on average higher on the rich list than the remaining ones. Descriptive network analyses indicate that some of today’s largest fortunes are intertwined through marital lines, hinting at social closure at the top. Our findings indicate that the accumulation and perpetuation of fortunes over many generations is an important feature of top wealth in Germany.
Topic:
Family, Elites, Wealth, Inheritance, and Network Analysis
Political Geography:
Europe and Germany

7. Industrial Feudalism and Wealth Inequalities

Author:
Hanna Szymborska and Jan Toporowski
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The possibility, first raised by Rudolf Hilferding, of stabilizing a capitalist economy through the operations of a ‘general cartel’, leaving only social and political ‘contradictions’ to disturb the functioning of the system, gave rise to a discussion among Marxists not only on whether such a stabilization was at all possible, but also on the nature and scope of those contradictions. This discussion had been anticipated in the 1890s in the work of the Polish Marxist Ludwik Krzywicki (1859 – 1941). He put forward the idea that, in a capitalist economy stabilized in this way, a state of ‘industrial feudalism’ would prevail, in which society would become stratified into social classes without the possibility of mobility between those classes. This analysis was extended in 1940s by Oskar Lange (1904-1965) as he attempted to make sense of the American New Deal and rediscovered in the 1950s by Tadeusz Kowalik (1926-2012). This paper explains the concept of industrial feudalism and argues that the main mechanism for such a stratification today is the unequal distribution of wealth, in the context of declining welfare provision.
Topic:
Industrial Policy, Inequality, Feudalism, Industry, and Wealth
Political Geography:
North America and United States of America

8. Household Wealth Inequalities in the wake of the Greek Debt Crisis

Author:
Apostolos Fasianos
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
Despite the renowned interest in wealth disparities, the distribution of wealth in Greece is largely understudied. This study maps the levels, dynamics, and composition of household wealth using data from the three waves of the Household Finance and Consumption Survey for Greece for the period after the debt crisis of 2009-10 till 2017. The evidence suggests that the richest 1% of the population holds roughly as much wealth as the poorest 50%, while the richest 10% holds about four times the wealth of the poorest 50%. Most inequality indicators employed indicate increasing trends in wealth disparities between 2009 and 2017. During this period, average and median wealth holdings decreased by about one third, and the share of financially fragile households increased by about 20%. Estimates from factor inequality decompositions suggest that, although relatively evenly distributed, housing asset holdings explain much of the increase in overall wealth inequality in Greece, followed by self-employment business equity; financial assets play a negligible role. Financial wealth inequality is much more pronounced than housing wealth inequality in Greece. The findings of the paper carry important implications for the design of appropriate policies aiming at reducing wealth inequalities and strengthening financial resilience.
Topic:
Debt, Income Inequality, Economic Crisis, and Wealth
Political Geography:
Europe and Greece

9. The Impact of Immovable Property Tax on the Macro Economy

Author:
Young Sik Jeong, Eunjung Kang, Jinhee Lee, Kyunghun Kim, and Jeehye Kim
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Since the 2008 global financial crisis, inequality has been increasing worldwide. In particular, wealth (asset) inequality is getting worse than income inequality. And Korea is no exception. This deepening of inequality is more worrisome in that it leads to inequality of opportunity while suppressing movement between classes, which in turn deepens inequality, creating a vicious cycle of inequality. This is a bigger problem than the inequality itself. The international communities are calling for stronger property taxes, including recurrent taxes on immovable property, as part of mitigating inequality and promoting inclusive growth. In Korea, there is heated discussion on property taxes, such as recurrent taxes on immovable property including the comprehensive real estate tax. Therefore, this study aims to investigate policy directions in international organizations and major countries on immovable property tax and examine the effect of property tax on the macro economy. This study examine international comparisons of immovable property tax burdens using OECD data. Next, this study analyzes the effect of immovable property tax on housing prices, inequality, and economic growth. Finally, we suggest policy implications to Korea through this. Based on our results, we present policy implications for Korea.
Topic:
Inequality, Tax Systems, Macroeconomics, and Wealth
Political Geography:
Asia and South Korea

10. Closing Pandora’s Box: How to Improve the Common Reporting Standard

Author:
Menusch Khadjavi and Marjolein Vertelman
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The 2021 pandora papers show that many wealthy individuals and even politicians use shell companies to hide their fortunes. In order to fight international personal tax evasion, the Common Reporting Standard (CRS) was implemented and it helped governments to collect USD 85 billion already. USD 182 billion are still missing from the government budget because of personal tax evasion. The individual implementation strategies of CRS compliant countries can endanger the effectiveness of the Automatic Exchange of Information (AEOI). Several loopholes are used to circumvent the CRS. There are amendments possible which increase the effectiveness by improving the implementation strategies and closing the loopholes. The enforcement of the CRS should become stricter by removing financial institutions’ licenses to operate in cases of non-compliance. Beneficial ownership registers should increase transparency regarding investments and securities. Within the current momentum of international tax legislation, the CRS compliant countries may leverage the USA into signing the CRS as well. The USA could in turn demand a more effective CRS before signing it.
Topic:
Reform, Finance, Business, and Wealth
Political Geography:
Global Focus