The top 1%

Question 1

Sources of inequality in Labour income

Answer 1

1) Differences in work ability
2) Difference in work effort
3) Specific Attributes
4) Luck

Question 2

Explanations for Rise/Fall in Top 1% income share

Answer 2

1) Taxes
2) Labour/earned income
3) Capital Income and Inheritances
4) Joint distribution of earned and capital income

Question 3

Explanation for the Great Gatsby Curve

Answer 3

1) Human Capital investments

2) Labour Markets

Question 4

Source of capital income inequality

Answer 4

Difference in wealth due to past savings and inheritances

Question 5

What does the great Gatsby curve tell us?

Answer 5

Countries with higher income inequality have lower social mobility. Inequality of outcome impacts equality of opportunity

Question 6

What does Mankiw argue?

Answer 6

High pay of top 1% represents a portion of the consumer surplus they generated for the economy. No rent-seeking, it is supply and demand driven. Inequality is not always inefficient as top 1% increase size of the pie. Genetics play a roll in the ability for high earners sons/daughter to also be rich. Issue is with bottom 1% not top 1%.