a revision of project proposal for " economics writing seminar" course

Economic inequality in America

Statement of the hypothesis

Wage stagnation, income and wealth disparity and underemployment have become chronic conditions that have impacted the resilience of the American economy and have resulted in huge economic inequality among American citizens.

Project proposal overview

The rapid increase of wealth inequality in the past few decades is one of the most disturbing social and economic issues of our time. Studying its origin and underlying mechanisms is essential for policy aiming to control and even reverse this trend. In that context, controlling the distribution of income, using income tax or other macroeconomic policy instruments, is generally perceived as effective for regulating the wealth distribution. I will provide a theoretical tool, based on the realistic modeling of wealth inequality dynamics, to describe the effects of personal savings and income distribution on wealth inequality. My theoretical approach will incorporate coupled equations, solved using iterated maps to model the dynamics of wealth and income inequality. Notably, using the appropriate historical parameter values will be able to capture the historical dynamics of wealth inequality in the United States. I will research on the effect of personal savings on wealth inequality, the effect of increasing and/or decreasing income tax on wealth inequality.

Related journal article

The journal article “Income Inequality, Equality of Opportunity, and Intergenerational Mobility”, by Corak, Miles focusses on the degree to which increasing inequality in the high-income countries, particularly in the United States, is likely to limit economic mobility for the next generation of young adults. The author discusses the underlying drivers of opportunity that generate the relationship between inequality and intergenerational mobility. The main goal of Miles is to explain why America differs from other countries, how intergenerational mobility will change in an era of higher inequality, and how the process is different for the top 1%. Miles begins by presenting evidence that countries with more inequality at one point in time also experience less earnings mobility across the generations, a relationship that has been called "The Great Gatsby Curve." (Corak) The interaction between families, labor markets, and public policies all structure a child's opportunities and determine the extent to which adult earnings are related to family background. He claims that both cross-country comparisons and the underlying trends suggest that the drivers are all configured most likely to lower, or at least not raise, the degree of intergenerational earnings mobility for the next generation of Americans coming of age in a more polarized labor market. The article concludes that this trend is more likely to continue except changes in public policy are enforced to promote the human capital of children in a way that offers relatively greater benefits to the relatively disadvantaged.

Data to be used

The data to be used from prior studies. For this research proposal, I will use data from the studies of Thomas Piketty and Gabriel Zucman. This data can be found in their websites (Thomas Piketty and Gabriel Zucman).

References Corak, Miles. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility." Journal of Economic Perspectives, 27(3) (2013): 79-102. Online. Thomas Piketty and Gabriel Zucman. Paris School of Economic. n.d. Websites: http://piketty.pse.ens.fr/ and http://gabriel-zucman.eu/