Technology and Inequality: reasons for concern, reasons for - - PowerPoint PPT Presentation

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Technology and Inequality: reasons for concern, reasons for - - PowerPoint PPT Presentation

Aug 21, 2022 524 likes •795 views

Technology and Inequality: reasons for concern, reasons for optimism Mark Stabile Stone Chaired Professor of Wealth Inequality Professor of Economics INSEAD Alumni Forum Europe 2017 Digital Transformation: A force for a better world? Outline

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Digital Transformation: A force for a better world?

Alumni Forum Europe 2017

Technology and Inequality: reasons for concern, reasons for

  • ptimism

Mark Stabile Stone Chaired Professor of Wealth Inequality Professor of Economics INSEAD

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Digital Transformation: A force for a better world?

Alumni Forum Europe 2017

Outline

  • What’s the inequality problem?
  • What’s worked in the past and what’s not working now?
  • What’s going to happen next?
  • How do we think about inequality and digital transformation?
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Digital Transformation: A force for a better world?

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The Global Financial Crisis & Recovery

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real GDP Growth Rates

Japan United Kingdom United States EU-27

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Digital Transformation: A force for a better world?

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Recovery has not been equal…

0% 20% 40% 60% 80% 100% 120% 1949-53 1954-57 1958-60 1961-69 1970-73 1975-79 1982-90 1991-00 2001-07 2009-12 2009-13 Percent

Source: Authors calculations based on data from The World Wealth and Income database

United States: Distribution of Average Income Growth during Periods of Expansions - Bottom 99: Top 1 [1949-2013]

Bottom 99 Top 1

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Digital Transformation: A force for a better world?

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0,05 0,1 0,15 0,2 0,25 0,3 1913 1916 1919 1922 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Percent

Top 1% Income Shares in the US with and without Capital Gains [1913-2013]

Top 1% Income Share-Capital Gains Excluded Top 1% Income Share-Capital Gains Included Source: Author’s calculations using World Wealth and Income Database

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Author’s calculations from WWI database

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Top 1% Income Share, Percent Data from OECD Stat and The World Wealth and Income Database

UK-Top 1% Income Share [1951-2013]

UK-Top 1% income share-married couples & single adults UK-Top 1% income share-adults

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0% 5% 10% 15% 20% 25% 1915 1917 1919 1921 1923 1925 1927 1929 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Top 1% Income Share, Percent Data from OECD Stat and The World Wealth and Income Database

France- Top 1% Income Share and Gini [1915-2011]

France- Top 1% income share

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Digital Transformation: A force for a better world?

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Why the rise?

  • Combination of market forces and policy choices

– Increased globalization – A decline in top marginal tax rates – Changes in bargaining and political power – Skill bias technological change and the return to labor

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Digital Transformation: A force for a better world?

Alumni Forum Europe 2017

Connecting inequality and social mobility

  • Does the “American Dream” still exist?
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Digital Transformation: A force for a better world?

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Mobility in the OECD

Intergenerational income elasticities among men

Larger number means less mobility

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Digital Transformation: A force for a better world?

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The Fading American Dream

Chetty et al (2016)

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Corak, 2011

Larger number means less mobility

Corak, 2013

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Recent responses to inequality coupled with stagnant growth in the middle

  • We are seeing movement away from traditional public policy

responses toward protest oriented responses.

  • People feel insecure (economically and physically) and are reacting

to that insecurity.

  • Occupy movement
  • Brexit
  • Trump
  • The growth of far right political parties
  • What’s next?
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Digital Transformation: A force for a better world?

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Is Business A Force for Good?

Source: Branko Milanovic

Change in real income between 1988 and 2005 (in 2005 international dollars) Rise of the 1% Decline of the middle class in rich countries India China … catch-up The very poor

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Digital Transformation: A force for a better world?

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Technology and Inequality

  • What’s the connection between technology and inequality?
  • Skill-biased technological change explanation from above.
  • Does well at explaining some periods. Not others.
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Digital Transformation: A force for a better world?

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Technological changes over the past century

Source: Card and Dinardo, 2002

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Digital Transformation: A force for a better world?

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“The race between education and technology”

Source: Acemoglu and Autor, 2012

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Up to 1.2 billion workers automated?

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McKinsey, 2016

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“We are being afflicted with a new disease of which some readers may not have heard the name, but of which they will hear a great deal in the years to come — namely, technological unemployment.” Keynes, 1930

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Employment growth is greater when there are more job titles…

Acemoglu and Restrepo, 2016

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But how does this effect inequality?

  • If new tasks are more complex, they will favor high skilled workers, leaving others behind.
  • If, over time, these skills become more available to all workers, there will then be catch up

(e.g. computers).

  • But… “over time” is a key part of the analysis.
  • The same people that are currently losing work are not (for the most part) the ones that will

get the new jobs.

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So what do we do?

  • Innovation and transformation will, of course, continue.
  • Some will (hopefully) even help instead of hurt inequality.
  • Need to couple this with interventions that will preserve innovation while managing

inequality and labor market disruption.

– Basic income – Changes in education – Redistribution (both to curb inequality and to fund the above)

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Thank you.

Mark Stabile Stone Chaired Professor in Wealth Inequality and Professor of Economics mark.stabile@insead.edu