Is the U-Curve that Pronounced? Revisiting Income Inequality in the United States, 1917-1945

Along with Phil Magness, John Moore and Phil Vøn Schløsser, I assembled a series of concerns that we have regarding the measurement of income inequality in the US before 1945 as pictured by the Piketty-Saez U-Curve. We argue that the pronounced left-hand side of the U-Curve is sensitive to minor changes in assumptions as well as minor improvements in data quality. We argue that income inequality probably did fall and rise over the 20th century, but not in the proportions presented in the Piketty-Saez papers. The paper is available here on SSRN and the abstract is below:

In this article, we reconsider the level and trend of the income inequality series produced by Piketty and Saez (2003, 2015) for the United States using tax data for the period prior to 1945, which forms the left-side of a century-long distributional U-curve. We argue that there are reasons to doubt the depicted shape of the left-side of the U-curve of inequality. We make corrections to the series for reporting behavior conditional on tax regimes, minor changes to the definition of the tax unit population, and the fiscal income denominator. All of these corrections show comparatively stable top income shares throughout the period. We point out that comparisons with other state-level tax datasets – like Wisconsin which has conceptual advantages over the IRS data – yield dramatically different results that should make us skeptical of the trends observed with the IRS data.

Fur Prices in Quebec, 1757-1832 (ADDENDUM)

I have a new working paper available. This one is a data note that I just submitted to Essays in Economic and Business History because I want the data to be easily available. Basically, it provides the first extension of price history regarding the fur industry in Canada past the 1760s well into the 19th century. The abstract is below and the paper can be found here on SSRN and here on Academia:

This short note provides the first data series of fur prices in Canada that expands beyond the end of French rule. Linking with other available price series allows us to generate a price history of furs in Canada spanning from the late seventeenth century to the beginning of the nineteenth century.

NOTE: I found an imprecision in this paper which forces me to revisit the archives to make sure of a crucial detail. For the sake of transparency, here is the problem: I did not record enough details about the prices reported. I only took the prices as cited so that 7.2 livres “Paië pour un castor” (7.2 livres paid for one beaver) was only noted down as such. In some instances, the word “pelt” (peau) appeared clearly. However, in some instances, it does not. Since beaver may have been consumed as meat as well as for the pelt itself, the amount of details that I noted down is not sufficient to make sure.  I know it sounds to be a minor technical since the avowed goal of my paper was to produce an index to measure movements and that the prices of pelts and beaver should be heavily. Nonetheless, since this paper is a stepping stone for another paper that is dear to me, I prefer to make sure that it does not affect the quality of the price movements that I purported to measure. As such, on July 31st 2017, I requested a delay from the editor of Essays in Economic and Business History so that I may visit the archives in Quebec City to answer this question. I have retracted the paper from the online versions on SSRN and Academia until I have been able to answer this point. 

Incomes and Growth in Canada, 1688 to 1790

After some work over details and robustness checks, I am finally ready to present the final version of my estimates of Canadian GDP from 1688 to 1790. The article is available here on SSRN, the abstract is below:

This article provides the first estimate of per capita GDP for Quebec – the largest colony in Canada before 1790. It finds a modest rate of long-term economic growth in spite of frequent large war shocks and that the inhabitants were poorer than the Americans, the British, and the French, equally rich as the Mexicans and richer than the Peruvians. It also finds that income-based comparisons yield a different result than wage-comparisons between New World and Old World Economies. 

Trends and Levels of Income Inequality in Wisconsin, 1919-1941 : The Effect of Using Different Data Sources

There is no rest for the wicked. Every morning, I am up at 05:30 to start writing and every day I advance my research agenda a little more. The most recent addition to my list is written with my good friend Phil Magness of George Mason University. Phil and I have been concentrated for the last year or so on the task of improving (alongside John Moore and Phil Schlosser for subsequent papers) the precision of inequality measurements before 1941 in the United States. There are many difficulties in tackling this topic, most notably the gargantuan magnitude of the task. As such, we sliced our contribution into different articles. The one you will find here on SSRN is the first (of three, maybe four) papers on the topic. The abstract is below:

In this short note, we use two different sources available for the state of Wisconsin
in order to assess the quality of income inequality measurements in the United States between the two World Wars. By comparing estimates derived from federal income tax records with estimates derived from the state income tax for Wisconsin, we find that each series produces highly different patterns and levels in inequality for the state. These findings attest to the high sensitivity of modern distributional estimation techniques to issues of quality with their underlying data sources. Noting this concern, we argue for greater caution in the use of income tax data for measuring historical income inequality.

Empire Effect Versus Crowding Out Effect: Shipping Productivity in the North Atlantic from 1764 to 1860

I know, I’ve published a lot of working papers in the last few days, but many of them came to maturity at the same time as a pure coincidence. However, the one I am publishing right now is slightly different. The other ones were ready for submission and publication (if accepted). This one is missing something as me and my co-authors (Jari Eloranta of Appalachian State University and Vadim Kufenko of the University of Hohenheim) fell that there is a need to “add some flesh around the bones” in order to improve the framing and the empirics of the paper. Basically, the paper asks if the public good of global security provided by Empire (i.e. what we call the security effect) comes at a cost too high because of the expenses associated with providing said security. We concentrate on the shipping industry and its productivity and argue that large military navies required to create the security effect generate a crowding-out effect on the industry that depresses trade. The abstract is below, the paper can be consulted here on SSRN and we welcome comments:

While there is a rich literature on the benefits of empire in terms of the provision of key public goods—notably security for international trade—the costs have been downplayed. In this paper, we focus on merchant shipping data between Canada and Britain between 1764 and 1860 to measure these costs. Imperial hegemony would have implied greater security for shippers and this, in turn, would have stimulated investments in productivity. However, we contend that a counter-effect would have operated simultaneously. The provision of greater security meant greater military navies which crowded out merchant navies in terms of availability of capital and labor. We argue that the benefit of the “security effect” has to be weighed against the cost of the “crowding-out” effect. We find that the “crowding-out effect” was larger than the “security effect.” For “security effects” to overpower “crowding out effects,” one had to have a very small navy in absolute terms but a large one relative to other military powers.


The Paradox of Good Health and Poverty: Assessing Cuban Health Outcomes Under Castro

I have a new working paper, which I have been allowing to mature for some months now, concerning the assessment of Cuba’s health outcomes since Castro took power in 1959. The abstract is below and the article can be consulted here on SSRN and here on Academia:

In spite of being poor and lacking in economic opportunities, the population of Cuba enjoyed significant improvements in health outcomes under the Castro regime. Many have praised the ability of the regime to overcome the barriers of poverty and economic stagnation in order to improve health outcomes. Many have also argued that efficient features of Cuba’s health policy should be imported regardless of political considerations. In this paper, we argue that these improvements are probably overestimated, but that they are real nonetheless. We also argue that some of these improvements were an integral part of health policy and could only have been realized by the use of extremely coercive institutions. While efficient at fighting certain types of diseases, coercive institutions are generally unable to generate economic growth. On the other hand, the poverty such coercive institutions engender may have actually helped improve health outcomes, providing us with a false impression of the efficacy of the health care system in Cuba.

British Public Debt, the Acadian Expulsion and the American Revolution

UPDATE: The chapter has been accepted for publication

I have a new working paper out there which has been submitted for publication as a chapter in an upcoming book on American economic history. The goal of the book is to provide insights from public choice theory into the study of American economic history. The abstract is below and the paper can be consulted here on SSRN and here on Academia:

Starting in 1755, the French-speaking colonists of Atlantic Canada (known as the Acadians) were deported by the British. The expulsion was desired by the American colonists in New England but was opposed by the government back in England. In fact, the expulsion was enacted against the wishes of the Imperial government.  Set against the backdrop of rising public debt in England, the costly expulsion of the Acadians (combined with the subsequent conquest of the French-speaking colony of Quebec) contributed to a change in policy course favoring centralization.  Using public choice theory, I construct a narrative to argue that the Acadian expulsion contributed to the initiation of the American Revolution.