Three Essays in Economic Inequality
type: CreativeWork
description: This thesis contains three chapters. The first two chapters provide the theoretical and empirical analysis of fast-growing inequality over recent decades, and the last chapter examines the employment effect of raising the minimum wage, a policy commonly used to support low-wage workers to mitigate increasing inequality. The first chapter investigates why the upsurge of top income shares has coincided with economic slowdowns in the United States after the late 1970s. Based on theoretical and empirical backgrounds, I argue that a fast-growing unearned income from 'wealth residual', defined as the unexplained increase in wealth that is not accompanied by any increase in real output, lies behind them. To demonstrate this hypothesis, after measuring wealth residual from the national accounts and the associated statistics, I perform a set of panel vector autoregressive models with heterogeneous dynamics using a comprehensive dataset of the United States at the state level. The estimation results highlight that the rapid growth of wealth residual during the last four decades, influenced by the government's regressive policies on rent-related activities, has generated a co-evolution of fast-growing inequality and economic slowdowns. My further policy analysis reveals that a sharp increase in wealth tax or housing supply itself is not likely to solve the problem; on the contrary, industrial policies that can divert excess rent-related finance into productive investment must take precedence. The second chapter investigates why some people 'stay' wealthy while others 'remain' poor despite the rapid expansion of aggregate wealth, and to what extent the government can affect wealth inequality. Based on the empirical evidence of persistently heterogeneous returns on wealth across households, I introduce the 'rentier premium', defined as the gap between the return on asset ownership and the return on capital used for the production of real output in a perfectly competitive market,…
abstract: This thesis contains three chapters. The first two chapters provide the theoretical and empirical analysis of fast-growing inequality over recent decades, and the last chapter examines the employment effect of raising the minimum wage, a policy commonly used to support low-wage workers to mitigate increasing inequality. The first chapter investigates why the upsurge of top income shares has coincided with economic slowdowns in the United States after the late 1970s. Based on theoretical and empirical backgrounds, I argue that a fast-growing unearned income from 'wealth residual', defined as the unexplained increase in wealth that is not accompanied by any increase in real output, lies behind them. To demonstrate this hypothesis, after measuring wealth residual from the national accounts and the associated statistics, I perform a set of panel vector autoregressive models with heterogeneous dynamics using a comprehensive dataset of the United States at the state level. The estimation results highlight that the rapid growth of wealth residual during the last four decades, influenced by the government's regressive policies on rent-related activities, has generated a co-evolution of fast-growing inequality and economic slowdowns. My further policy analysis reveals that a sharp increase in wealth tax or housing supply itself is not likely to solve the problem; on the contrary, industrial policies that can divert excess rent-related finance into productive investment must take precedence. The second chapter investigates why some people 'stay' wealthy while others 'remain' poor despite the rapid expansion of aggregate wealth, and to what extent the government can affect wealth inequality. Based on the empirical evidence of persistently heterogeneous returns on wealth across households, I introduce the 'rentier premium', defined as the gap between the return on asset ownership and the return on capital used for the production of real output in a perfectly competitive market,…
author: Lee, Jang Youn
language: eng
keywords: wealth residual, inequality, growth, panel vector autoregressive model, rentier premium, heterogeneous agents DSGE, minimum wage, non-linear employment effect, regression discontinuity designs
license: https://apollo8-f-pro.lib.cam.ac.uk/bitstreams/330ead84-bc36-4544-b723-9e28037e4d83/download
license: https://www.rioxx.net/licenses/all-rights-reserved/
date published: 2020-09-01
date modified: 2026-07-22T22:24:32Z
provider: Cambridge University
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Cambridge

PropertyValue
property ID: DOI
value: 10.17863/CAM.68668