Current issues: Income Distribution

Thomas Piketty is in Japan (you may have seen him being interviewed on NHK). This has brought income distribution issues to the fore. Income inequality has been rising in Japan. (Admittedly,  I wrote a post last May about Thomas Piketty, but decided I should remind you of the issues!)

Japan had the same high level of inequality as Europe in the early 20th century, with a small number of wealthy people getting a large portion of national income. “[A]ll signs are that in terms of both income structure and income inequality, Japan was indeed the same ‘old world’ as Europe,” writes  Piketty, a professor at the Paris School of Economics. But inequality shrank sharply after the two world wars as the fighting destroyed much of the elite’s wealth.

Japan has seen wealth become slightly more concentrated over the past two decades, but not nearly to the degree of the U.S. In Japan, the top 1%’s share of national income rose about two percentage points to around 9% or slightly higher today from 7% in the 1980s. France, Germany and Sweden experienced roughly similar rises, whereas the top 1% picked up 10 to 15 percentage points in the U.S. As for the top 0.1%, in Japan their share of national income has been nearly 2.5% recently, up from 1.5% in the early 1980s.

In addition, the effect of an increase in consumption (indirect) taxes is regressive. Piketty asserted last week that Japan should not raise the consumption tax further to the planned 10% rate. The rises in the special extra tax on cigarettes, while it helps the market adjust to the negative externalities of smoking, is also particularly regressive because lower-income households tend to smoke more (whether due to lack of education or because they cannot afford other “luxuries”……..?).

Piketty is often descibed as the most important economist of his generation and his book may become as significant as Keynes’s “General Theory on Employment, Interest and Money” in shaping future policies on taxation etc.
This describes his main thesis rather simply:
And this is an interview with Thomas Piketty

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