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This paper is motivated by two parallel trends: the declining labor share of income and increasing inequality. Micro and macroeconomic data, covering up to 93 countries between 1970 and 2013, are used to assess whether the declining labor share of income has been a key factor driving growing inequality. The major conclusion is that changes in income inequality across a wide range of countries have been driven significantly by changes in the inequality of wages, while the distribution of income between labor and capital has not been a major factor.

Labor --- Macroeconomics --- Personal Income, Wealth, and Their Distributions --- Factor Income Distribution --- Aggregate Factor Income Distribution --- Wages, Compensation, and Labor Costs: General --- Labor Economics: General --- Labour --- income economics --- Income inequality --- Personal income --- Income distribution --- Labor share --- National accounts --- Income --- Wages --- Labor economics --- United States

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We evaluate the impact of fiscal reforms on growth and inequality in Cambodia using a calibrated general equilibrium model with heterogeneous agents (Peralta-Alva et al., 2018). Over the last two decades, Cambodia’s consumption inequality and poverty have declined. However, income inequality is higher, and large gaps remain between urban and rural residents. At the same time, domestic revenue mobilization has improved substantially, but collection of tax revenue is biased towards non-progressive sources. We use the model to evaluate the growth and inequality impact of reforms that increase infrastructure spending by raising (i) VAT, (ii) property tax, or (iii) personal income tax. We find that using property taxes delivers the largest increase in GDP and reduction in inequality. Reaping the gains from property taxation will however require additional investments in tax administration.

Cambodia --- Economic conditions. --- Macroeconomics --- Aggregate Factor Income Distribution --- Personal Income, Wealth, and Their Distributions --- Macroeconomics: Consumption --- Saving --- Wealth --- Income --- Personal income --- Consumption --- Income inequality --- Income distribution --- National accounts --- Economics

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There is growing concern in Europe over the impact of globalization on high and evenly shared living standards. These concerns have often surfaced in response to falling labor income shares in aggregate national income data. However, these data may tell little about the underlying distribution of incomes based on household disposable incomes. While summary measures of income distributions also suggest that inequality has increased in most industrialized countries, this development was very uneven and much less pronounced in euro-area countries, suggesting that broad phenomena such as trade liberalization and technological change may not be major drivers of inequality.

Labor --- Macroeconomics --- Personal Income, Wealth, and Their Distributions --- Wage Level and Structure --- Wage Differentials --- Aggregate Factor Income Distribution --- Wages, Compensation, and Labor Costs: General --- Labour --- income economics --- Income inequality --- Wages --- Income distribution --- Income --- Labor share --- National accounts --- United States

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This paper examines the effects of inflation and associated financial instability on income distribution. Using both pooled cross country and single country time series models, the level of inflation, inflation variability, and the variability of the nominal exchange rate are shown to impact negatively on overall income equality. Looking at disaggregate measures of income distribution, the issue as to whether inflation is a progressive or regressive tax is found to be negatively correlated with the level of development and the sophistication of the financial structure. The paper argues that these results point towards financial variables as a partial way of rectifying the generally poor explanatory power of both cross-country and time series models of income distribution.

Foreign Exchange --- Inflation --- Macroeconomics --- Aggregate Factor Income Distribution --- Price Level --- Deflation --- Personal Income, Wealth, and Their Distributions --- Currency --- Foreign exchange --- Income distribution --- Personal income --- Consumer price indexes --- Purchasing power parity --- National accounts --- Prices --- Income --- Price indexes --- United States

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The paper focuses on distributional consequences of macroeconomic adjustment. The preferences of economic agents over the level of the real exchange rate derived from standard models are monotonic, with agents favoring either an infinitely appreciated or depreciated rate. To generate less extreme preferences, a model is presented where appreciation would depress economic activity, while a large depreciation would hit the tradable sector by limiting the availability of labor, offsetting the favorable price effect. The model is in the spirit of the dependent economy model, but built on explicit microfoundations. The results can be used to analyze political economy aspects of macroeconomic adjustment.

Foreign Exchange --- Labor --- Macroeconomics --- Political Economy --- Open Economy Macroeconomics --- Wages, Compensation, and Labor Costs: General --- Labor Economics: General --- Aggregate Factor Income Distribution --- Labour --- income economics --- Currency --- Foreign exchange --- Political economy --- Real exchange rates --- Wages --- Income --- Labor economics --- Economics