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02/12/2016

Irene van Staveren on Anthony Atkinson’s Inequality: What Can Be Done?

AtkinsonVarious important books have been published recently about economic inequality, from Piketty on wealth to Wilkinson and Pickett on social impacts. Tony Atkinson's book Inequality: What Can Be Done? focuses on the characteristics of income inequality and what can be done about it.

First, Atkinson presents data on household income inequality from the Luxembourg Income Studies data (LIS). A country comparison shows that the Gini coefficients of both the US and the UK are relatively high, above 35, with many continental European countries showing figures between 25 and 30. He also points out that the Gini coefficients have been on the rise since the 1980s in most Western countries.

Second, he presents a long list of policy proposals. Let me share a few with you, which are of particular interest for social economics. On taxation, he proposes to raise the marginal income tax rate to 65 percent and to introduce a substantive earned income discount. Furthermore, he comes with an innovative proposal on inheritance taxation: no longer on the giver but on the receiver, with a lifetime progressive capital taxation. This is an incentive to leave one’s wealth behind for the poorest relatives, charities or other goals, rather than for the richest relatives. Next, he proposes a substantial child benefit, to be taxed as income, so that the rich benefit much less than the poor. Moreover, he pleas for a basic children’s income and a basic capital endowment for all at adulthood. And he insists on a one percent development aid of GNP.

On employment, he argues for a target for unemployment reduction in the UK, as in the US, as well as a minimum wage as a living wage, as in the Netherlands, and a public employment guarantee, as in India.

Atkinson's argumentation is smart. He demonstrates the history of his proposals, with old and new claims by politicians, activists, and even business leaders (UK premier league football clubs, such as Chelsea). And he argues that “there is not just one economics” (p. 5), showing a variety of economic arguments, including Kenneth Arrow’s argument that ethical codes should be part of businesses behavior. Of course, Atkinson criticizes the break-down of the welfare state in many Western countries, with a reduction in benefits and coverage for disadvantaged groups. But he does not fall into the trap of proposing increasing public expenditures in times where many governments seek to reduce public debt and budget deficits. Instead, his fiscal proposals are all revenue-neutral. Hence, the political feasibility should not be a constraint. I find this part of his policy proposals the smartest one of all.

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IreneIrene van Staveren is professor of Pluralist Development Economics at the Institute of Social Studies of Erasmus University Rotterdam, the Netherlands. She was awarded the 2014 Lifetime Achievement Thomas Divine award by the Association of Social Economics.

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