Another entry in the inequality discussion

31/01/2014 § 3 Comments

Pattrick Smellie’s column yesterday highlighted that Brian Easton has a new publication on inequality. Easton’s work is based in part on the thorough MSD report by Bryan Perry, which was highlighted in comments early this week (h/t Mary). Apparently, Easton is less complimentary about the Rashbrooke book, which I’ve covered before (here, here, and here).

That was a link-o-licious paragraph.

Easton and Smellie picked up on something that also struck me about Perry’s analysis (this from Smellie):

Between the mid-1980s and mid-1990s, Rogernomics cut a swath through traditional, subsidised industries; income tax cuts and GST were instituted, which hit the poor rather than the rich; and then the Ruth Richardson welfare cuts of the early 1990s completed a sharp decline in equality.

“The trend after the mid-1990s is more ambiguous,” Easton said.

“The best interpretation is that the income distribution has remained at roughly the same level of inequality over the last two decades.”

The trend shows up in this graph of the Gini coefficient in New Zealand over time (Perry, Figure D.17):

Gini_trend

The graph struck me for two reasons:

  • Commentators often wring their hands about New Zealand falling behind the rest of the world on incomes, productivity, etc. A lot of that falling behind happened in the 1980s and 1990s, with less of it in this century. That is, we have fallen behind, rather than we are falling behind. Apparently, there’s a similar trend with inequality: it did increase, rather than it is increasing.
  • The Occupy movement and commentary by Krugman, DeLong, Saez, etc. focus on the increase in inequality in the last 10 to 15 years, things like:

Yet the bulk of the rise in top income shares is in fact at the very top.

The experience in New Zealand appears to be different. It’s a reminder that we have our own economy with its own issues, and should be careful importing slogans and solutions from overseas.

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