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Inequality, Too Much of a Good Thing

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  • Alan B. Krueger

    (Princeton University and NBER)

Abstract

As the title of this essay suggests, I believe there are both positive and negative effects of inequality. On the positive side, differential rewards provide incentives for individuals to work hard, invest and innovate. On the negative side, differences in rewards that are unrelated to productivity -- due to racial discrimination, for example -- are corrosive to civil society and cause resources to be misallocated. Even if discrimination did not exist, however, income inequality would be problematic in a democratic society if those who are privileged use their economic muscle to curry favor in the political arena and thereby secure monopoly rents or other advantages. Moreover, for several reasons discussed in the next section, poverty and income inequality create negative externalities. Consequently, it can be in the interest of the wealthy as well as the poor to raise the incomes of the poor, especially by using education and training as a means for redistribution.
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  • Alan B. Krueger, 2002. "Inequality, Too Much of a Good Thing," Working Papers 845, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:466
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    2. Benabou, Roland, 2005. "Inequality, Technology and the Social Contract," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 25, pages 1595-1638, Elsevier.
    3. Quintana-Domeque, Climent & Wohlfart, Johannes, 2016. "“Relative concerns for consumption at the top”: An intertemporal analysis for the UK," Journal of Economic Behavior & Organization, Elsevier, vol. 129(C), pages 172-194.
    4. Wael Mousa, 2018. "Macroeconomic Determinants of Saudi Total Factor Productivity," Applied Economics and Finance, Redfame publishing, vol. 5(1), pages 37-44, January.
    5. Maria Rouziou, 2019. "The contingent value of pay inequalities in sales organizations: integrating literatures in economics, management, and psychology," AMS Review, Springer;Academy of Marketing Science, vol. 9(3), pages 184-204, December.
    6. Costas Meghir & Mårten Palme, 2003. "Ability, parental background and educational policy: empirical evidence from a social experiment," IFS Working Papers W03/05, Institute for Fiscal Studies.
    7. Mircea Vultur & Louis Cornelissen, 2019. "Polygraphie du chômage des jeunes au Québec et au Canada (1998-2018)," CIRANO Working Papers 2019s-32, CIRANO.
    8. Fumio Ohtake & Jun Tomioka, 2004. "Who Supports Redistribution?," The Japanese Economic Review, Japanese Economic Association, vol. 55(4), pages 333-354, December.
    9. Stenberg, Anders, 2011. "Using longitudinal data to evaluate publicly provided formal education for low skilled," Economics of Education Review, Elsevier, vol. 30(6), pages 1262-1280.
    10. Costas Meghir & Mårten Palme, 2005. "Educational Reform, Ability, and Family Background," American Economic Review, American Economic Association, vol. 95(1), pages 414-424, March.
    11. Mönnig Anke & Maier Tobias & Zika Gerd, 2019. "Economy 4.0 – Digitalisation and Its Effect on Wage Inequality," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(3), pages 363-398, June.
    12. Roland Benabou & Francis Kramarz & Corinne Prost, 2003. "Zones d'Education Prioritaire : Quels moyens pour quels résultats ?," Working Papers 2003-38, Center for Research in Economics and Statistics.
    13. Maggie Jones, 2017. "Student Aid And The Distribution Of Educational Attainment," Working Paper 1373, Economics Department, Queen's University.
    14. Jonas Agell, 2004. "Efficiency and Equality in the Labour Market," CESifo Economic Studies, CESifo Group, vol. 50(2), pages 255-278.

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