School of Economics
Academic Year 2015-16
Term 1
Econ 217 Macroeconomics of Income Distribution
Instructor Name
: Ho Kong Weng
Email
: [email protected]
Tel
: 6808-7955
Office
: SOE 5034
COURSE DESCRIPTION
This course will use measures of income distribution and income inequality to discuss trends and
cross-country variations, examine macroeconomic models with implications on income distribution
and re-distribution, and analyze government policies in relation to income distribution. Global studies
(including the case of Singapore) on income inequality, intergenerational mobility, and related issues
on disparity will be reviewed, and discussed. Topics may include some or all of the following:
measurement of income inequality, problems of rising inequality in advanced and emerging
economies, top one percent, growth and inequality, intergenerational mobility and inequality,
globalization and inequality, fiscal and redistribution policies, inequality and happiness, etc.
Some questions students may ask:
1. Is the course an econometrics course? No. Econ 107 Introduction to Econometrics (formerly known
as Econ 107 Applied Econometrics) is not a pre-requisite for this course but majority of the past
students had done Econ 107 (except one student out of two sections in Term 2, 2014/15). Students
will need to understand and interpret the findings from empirical studies or papers referred in the
course in the exam.
2. Is the course a mathematically oriented course as in solving complicated mathematical models?
No. However, students are required to explain intuitively the theoretical solutions and predictions of
the models presented in the course and link these theoretical implications to empirical studies or
policy papers discussed in class and observed in the real world. Intuitive application of graphical
analysis, when appropriate for some models discussed, can be tested.
LEARNING OBJECTIVES
Students will learn modeling techniques, work with data related to income distribution, interpret
empirical findings, explain model predictions intuitively, and engage in discussions on policies related
to inequality.
ASSESSMENT METHODS
Class Participation
Group Project
Mid-Term Test
Final Examination
Total
: 10%
: 20%
: 30%
: 40%
: 100%
Class Participation
Participation in class discussions and asking questions will enhance your understanding and
application of concepts and theories covered in the course. Seize the opportunity to participate
positively in class so that you may learn from one another.
1
Group Project
There will be 10 topics for group projects. Each team will comprise 2 to 5 members randomly
assigned by the system in eLearn. Topics will be randomly assigned to the teams. Each presenting
team will make a 15-minute presentation followed by a 5-minute comment by discussant team, and
another 5-minute class discussion. A group project report has to be submitted one week after the
presentation.
The specific questions will be given to you at least two weeks prior to your presentation. Demonstrate
that you are able to apply the theories and techniques learnt in class to address the project questions.
You are expected to review the assigned paper(s), critically examine the theoretical or empirical
findings in the paper(s)/literature, and present your arguments intuitively.
Optional learning activities for group projects beyond the project questions include a more
comprehensive or extensive literature review, proposal or modification of a model to analyze the
problem, proposal or outline of follow-up research strategies, empirical studies to test your
hypotheses, and analyses of current government policies related to income distribution. Given the
time constraints of the group projects, students are not expected to do all of these optional activities.
Examinations
The midterm test in Week 7 will cover materials from Weeks 1 to 5 while the final exam will cover all
topics.
Both exams are closed book. However, you may bring one A4-sized handwritten, double-sided cheat
sheet of notes and formulae for the midterm test. As the final exam will cover all topics, you are
advised to prepare and bring one new piece of A4-sized handwritten, double-sided cheat
sheet; only one piece is allowed in the final exam.
There will be no make-up for the mid-term test. If you are absent for the mid-term test, your final exam
will count for 60% of the overall grade, implying a penalty of 10% of the overall grade a priori.
ACADEMIC INTEGRITY
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication,
facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or
tampering with the academic work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the student’s own
work. Penalties for violation of the policy range from zero marks for the component assessment to
expulsion, depending on the nature of the offense.
When in doubt, students should consult the instructors of the course. Details on the SMU Code of
Academic Integrity may be accessed at http://www.smuscd.org/resources.html.
CLASS TIMINGS
Class sessions are of 3-hour duration per week on Thursdays. We will have lecture presentations,
group projects by presenting teams and discussant teams.
Week
Topic
1
20/8
Introduction and Case Study on Singapore
Remark
Lecture Readings:
Ho, Kong Weng, (2010), Social Mobility in Singapore, in Chong, T. (Ed.), Management of Success:
Singapore Revisited, Institute of Southeast Asian Studies.
Ho, Kong Weng, (2012), Growth and Inequality in Singapore, in Xue, J. (Ed.), Growth with Inequality:
An International Comparison on Income Distribution, World Scientific Publishing, pp. 191-206.
2
Group Project Readings for Week 5:
Bhaskaran, Manu, et al., (2012), “Inequality and the Need for a New Social Compact”, Singapore
Perspectives 2012 Background Paper
Yip, Chun Seng, (2012), “Intergenerational Income Mobility in Singapore”
2
27/8
Globalization and Inequality
Lecture Readings:
Kremer, Michael and Eric Maskin, (2006), Globalization and Inequality.
Ho, Kong Weng and Hian Teck Hoon, (2003), Service Links and Wage Inequality.
Group Project Readings for Week 9:
Jaumotte, Florence, et al., (2013), “Rising Income Inequality: Technology, or Trade and Financial
Globalization?”, IMF Economic Review, vol. 61, no. 2
Birdsall, Nancy, (2005), “Why Inequality Matters in a Globalizing World”, lecture delivered October 26,
2005 at the World Institute for Development Economic Research (WIDER) in Helsinki, Finland
3
3/9
Piketty’s Capital and Inequality
Lecture Readings:
Piketty, Thomas, (2014), Capital in the Twenty-First Century, Harvard University Press.
“New Theoretical Perspectives on the Distribution of Income and Wealth Among Individuals”, video at
https://www.youtube.com/watch?v=RO8KWTb2iPM&feature=player_embedded
Jones, Charles I., (2015), “Pareto and Piketty: The Macroeconomics of Top Income and Wealth
Inequality”, Journal of Economic Perspectives, vol. 29, no. 1, pp. 29-46.
Optional Readings:
Alvaredo, Facundo, et al., (2013), “The Top 1 Percent in International and Historical Perspective”,
Journal of Economic Perspectives, vol. 27, no. 3, pp. 3–20
Mankiw, N. Gregory, (2013), “Defending the One Percent”, Journal of Economic Perspectives, vol. 27,
no. 3, pp. 21-34
4
10/9
Top One Percent
Lecture Readings:
Jones, Charles I. and Jihee Kim, (2014), “A Schumpeterian Model of Top Income Inequality”
Group Project Readings for Week 10:
Bonica, Adam, et al., (2013), “Why Hasn’t Democracy Slowed Rising Inequality?”, Journal of Economic
Perspectives, vol. 27, no. 3, pp. 103–124
Bivens, Josh and Lawrence Mishel, (2013), “The Pay of Corporate Executives and
Financial Professionals as Evidence of Rents in Top 1 Percent Incomes”, Journal of Economic
Perspectives, vol. 27, no. 3, pp. 57–78
5
17/9
Meet on
Sat, 19/9,
as well
Inequality and Growth
Lecture Readings:
Federico Cingano (2014), “Trends in Income Inequality and its
Impact on Economic Growth”, OECD Social, Employment and Migration Working Papers No. 163
Oded Galor, (2011), “Inequality, Human Capital Formation and the Process of Development”, NBER
Working Paper No. 17058
Group Project Reading for Week 11:
3
Brueckner, Markus, et al., (2014), “National Income and Its Distribution”, IMF Working Paper WP/14/01
Group Projects: Presenting Team 1 and Discussant Team 5; Presenting Team 2 and Discussant Team
6
6
19/9
Sat
Review Lecture for Midterm Test
7
1/10
Midterm Test
8
Recess
9
15/10
Inequality in Emerging Economies
(Makeup lecture on 19/9, Sat, Week 5, as the usual Thu, 24/9, Week 6, is a public holiday)
Lecture Readings:
OECD (2011), Divided We Stand: Why Inequality Keeps Rising, “Special Focus: Inequality in Emerging
Economies”
Group Project Readings for Week 12:
United Nations Development Programme, (2014), Humanity Divided: Confronting Inequality in
Developing Countries, Chapter 7: A policy framework for addressing inequality in developing countries
Phang Sock Yong, (2015), “Superstar Cities, Inequality and Housing Policy”, summary of the Celia
Moh Professorial Chair Public Lecture delivered on 23 March 2015 at the Singapore Management
University
Group Projects: Presenting Team 3 and Discussant Team 7; Presenting Team 4 and Discussant Team
8
10
22/10
Fiscal Policy and Income Inequality
Lecture Readings:
International Monetary Fund, (2014), Fiscal Policy and Income Inequality, IMF Policy Paper
Group Projects: Presenting Team 5 and Discussant Team 9; Presenting Team 6 and Discussant Team
10
11
29/10
Intergenerational Mobility: Over Time and Place
Lecture Reading:
Solon, G., (2004), A Model of Intergenerational Mobility Variation over Time and Place, in Corak, M.,
(Ed.), Generational Income Mobility in North America and Europe, Cambridge University Press.
Group Projects: Presenting Team 7 and Discussant Team 1; Presenting Team 8 and Discussant Team
2
12
5/11
Inequality and Happiness
Lecture Readings:
Alesina, Tella, and MacCulloch, (2004), “Inequality and happiness: are Europeans and Americans
different?”, Journal of Public Economics, vol. 88, pp. 2009–2042
Simone M. Schneider, (2012), “Income Inequality and its Consequences for Life
Satisfaction: What Role do Social Cognitions Play?”, Social Indicators Research, vol. 106, pp. 419–438
Group Projects: Presenting Team 9 and Discussant Team 3; Presenting Team 10 and Discussant
Team 4
13
12/11
Review Lecture for Final Exam
4
RECOMMENDED TEXT
There is no one textbook assigned for the course. References to books, journal articles, and web links
will be provided during the course. Apart from the readings listed above, following is a list of
OPTIONAL reference readings and website links for the students:
Atkinson, Anthony B., (2014), Handbook of Income Distribution SET vols. 2A-2B, Burlington : Elsevier
Science.
Atkinson, Anthony B., (2015), Inequality: What Can Be Done? Harvard University Press.
Arrow, K., S. Bowles, and S. Durlauf, (2000), Meritocracy and Economic Inequality, Princeton
University Press.
Bertola, G., R. Foellmi, and J. Zweimuller, (2006, hardcopy) (2014, paperback), Income Distribution in
Macroeconomic Models, Princeton University Press.
Campano, F. and D. Salvatore, (2006), Income Distribution: Includes CD, Oxford University Press.
Corak, M., (2013), “Income Inequality, Equality of Opportunity, and Intergenerational Mobility”, Journal
of Economic Perspectives, vol. 27, no. 3, pp. 79-102.
Cowell, F.A., (2011), Measuring Inequality, Oxford University Press.
Chetty, R., N. Hendren, P. Kline, E. Saez, and N. Turner, (2014), “Is the United States Still a Land of
Opportunity? Recent Trends in Intergenerational Mobility”, American Economic Review: Papers and
Proceedings, vol. 104, no. 5, pp. 141-147.
Galor, O. and J. Zeira, (1993), “Income Distribution and Macroeconomics”, Review of Economic
Studies, vol. 60, pp. 35-52.
Hassler, J. and J.V.R. Mora, (2000), “Intelligence, Social Mobility, and Growth”, American Economic
Review, vol. 90, no. 4, pp. 888-908.
Hoeller, Peter, et al., (eds.) (2014), Income Inequality in OECD Countries: What Are The Drivers and
Policy Options? Singapore : World Scientific, 2014
Hui, W.T., (2013), “Economic Growth and Inequality in Singapore: The Case for a Minimum Wage”,
International Labour Review, vol. 152, no. 1, pp. 107-123.
International Monetary Fund, (2014), Seminar: The Macroeconomics of Income Inequality: A Global
Perspective, video available at
http://link.brightcove.com/services/player/bcpid625505131001?bckey=AQ~~,AAAACofWkTk~,dcWVfCeeBEH0CDEexAone3jAYWFdAyT&bclid=0&bctid=3457694690001
Kaplan, S.N. and J. Rauh, (2013), “It’s the Market: The Broad-Based Rise in the Return to Top
Talent”, Journal of Economic Perspectives, vol. 27, no. 3, pp. 35-56.
Mukhopadhaya, Pundarik, (2014), Income Inequality in Singapore, Hoboken : Taylor and Francis.
Ng, I.Y.H., X.Y. Shen, X.Y., and K.W. Ho, (2009), “Intergenerational Earnings Mobility in Singapore
and the United States”, Journal of Asian Economics, vol. 20, no. 2, pp. 110-119.
OECD, (2012), “Income Inequality and Growth: The Role of Taxes and Transfers”, OECD economics
Department Policy Notes, No. 9, January 2012.
Ostry, J.D., A. Berg, C.G. Tsangarides, (2014), “Redistribution, Inequality, and Growth”, IMF Staff
Discussion Note, SDN/14/02
5
Stiglitz, J.E., (2012), “Macroeconomic Fluctuations, Inequality, and Human Development”, Journal of
Human Development and Capabilities: A Multi-Disciplinary Journal for People-Centered Development,
vol. 13, no. 1, pp. 31-58.
Stiglitz, Joseph E., (2015), The Great Divide: Unequal Societies and What We Can Do About Them,
W.W. Norton.
Toh, R. and W.T. Hui, (2012), “Trade Liberalization, Labor Demand Shifts and Earnings Inequality in
Singapore”, Review of Urban & Regional Development Studies, vol. 24, no. 3, pp. 65-82.
6