Adding to my growing collection of thoughts on inequality*, I’ve come across this insightful paper.
The work by Yonatan Berman seems very comprehensive. (in above graph)** he shows the rise and fall of absolute mobility as expressed by % children who earn more than parents.
Importantly, he goes on to show that out of the decline in absolute mobility that for most countries he examined, the largest factor was growth and that inequality was only a secondary factor (except in the US, and it’s big part of the UK though even in the UK growth is a bigger factor).
Berman (2018)
That’s evidence for the “grow the pie” type of arguments for helping mobility (over “share the pie”) and that sustainable growth remains the most important factor for improving absolute mobility. Policies can do both but if you had to trade-off in most countries growth seems to be a better option according to this (how that intersects with environmental sustainability and consumerism is a conundrum).
That said, in the US policies that work better on “splitting the pie” (see Dalio on Reforming Capitalism) may have outsized gains given its unique status on inequality being a bigger driver of lower absolute mobility.
It’s a long read but see all of Berman’s papers here on his site: https://www.yonatanberman.com/working-papers
Dalio on Reforming Capitalism:
https://www.thendobetter.com/investing/2019/4/6/ray-dalio-on-reforming-capitalism
And Taleb’s counter to Dalio:
A thought on the hypothesis that all war, famine, disasters and the like have been the only major drivers of reducing inequality (policy has been ineffective), (Walter Scheidel’s book, Great Leveller)
https://www.thendobetter.com/investing/2018/3/25/inequality-inevitable-how-bad
A thought on longitudinal inequality:
https://www.thendobetter.com/investing/2019/5/11/a-longitudinal-look-at-inequality
A thought on how innovation potential is lost by inequality: https://www.thendobetter.com/investing/2017/12/4/lost-einsteins-cost-of-inequality