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Final Argumentative Essay Topic |
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Running head: FINAL ARGUMENTATIVE ESSAY TOPIC
Final Argumentative Essay Topic
Name
Institution
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FINAL ARGUMENTATIVE ESSAY TOPIC
Final Argumentative Essay Topic
The selected topics for the proposed argumentative essay are minimum wage and wealth
disparity because of the interconnectedness and the impact of the resolving one on the other.
First, experts contend that the global minimum wage problem is one of the main factors for the
widening gap between the rich and poor in most parts of the world. A study that examines the
relationship between these issues, as well as the factors responsible for the increasing rate of
their occurrence and impact on human development index is a necessity for this period. Also,
there is a need to evaluate the role of economic policies of specific nations as means to gaining
insights into the issues surrounding the minimum wage crisis that have unbalance income
distribution as one of its consequences.
Berman, Ben-Jacob & Shapira (2016) described the wealth disparity problem as one
whose fundamental causes can only be understood through the examination of its link with the
global minimum wage problem, especially in developed nations with buoyant economies. In
their article, Saez & Zucman (2016) performed a comprehensive analytical review of the issues
from the perspective of the income data and their impact on the potential for people to improve
their socioeconomic status. While these articles are scholarly, their credibility and relevance
would be measured with the CRAAP Test to ensure that their information is authentic, the
authors are competent, and the content is valid and purposeful for the argumentative essay. In
conclusion, scholarly materials are critical for obtaining evidence to support the arguments on
the vast gap in wealth distribution because of the quality of information they contain, as well as
the use of empirical evidence to support them.
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FINAL ARGUMENTATIVE ESSAY TOPIC
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References
Berman, Y., Ben-Jacob, E., & Shapira, Y. (2016). The dynamics of wealth inequality and the
effect of income distribution. PloS one, 11(4), e0154196.
Saez, E., & Zucman, G. (2016). Wealth inequality in the United States since 1913: Evidence
from capitalized income tax data. The Quarterly Journal of Economics, 131(2), 519-578.
RESEARCH ARTICLE
The Dynamics of Wealth Inequality and the
Effect of Income Distribution
Yonatan Berman*, Eshel Ben-Jacob†, Yoash Shapira*
School of Physics and Astronomy, Tel-Aviv University, Tel-Aviv, Israel
† Deceased.
* yonatanb@post.tau.ac.il (YB); yoashshapia@gmail.com (YS)
Abstract
a11111
OPEN ACCESS
Citation: Berman Y, Ben-Jacob E, Shapira Y (2016)
The Dynamics of Wealth Inequality and the Effect of
Income Distribution. PLoS ONE 11(4): e0154196.
doi:10.1371/journal.pone.0154196
Editor: Delmiro Fernandez-Reyes, University
College London, UNITED KINGDOM
Received: November 18, 2015
Accepted: April 6, 2016
Published: April 22, 2016
Copyright: © 2016 Berman et al. This is an open
access article distributed under the terms of the
Creative Commons Attribution License, which permits
unrestricted use, distribution, and reproduction in any
medium, provided the original author and source are
credited.
Data Availability Statement: Data are taken from
the studies of Thomas Piketty and Gabriel Zucman
and can be found in their websites - http://piketty.pse.
ens.fr/ and http://gabriel-zucman.eu/, respectively.
Funding: The authors have no support or funding to
report.
Competing Interests: The authors have declared
that no competing interests exist.
The rapid increase of wealth inequality in the past few decades is one of the most disturbing
social and economic issues of our time. Studying its origin and underlying mechanisms is
essential for policy aiming to control and even reverse this trend. In that context, controlling
the distribution of income, using income tax or other macroeconomic policy instruments, is
generally perceived as effective for regulating the wealth distribution. We provide a theoretical tool, based on the realistic modeling of wealth inequality dynamics, to describe the
effects of personal savings and income distribution on wealth inequality. Our theoretical
approach incorporates coupled equations, solved using iterated maps to model the dynamics of wealth and income inequality. Notably, using the appropriate historical parameter values we were able to capture the historical dynamics of wealth inequality in the United States
during the course of the 20th century. It is found that the effect of personal savings on wealth
inequality is substantial, and its major decrease in the past 30 years can be associated with
the current wealth inequality surge. In addition, the effect of increasing income tax, though
naturally contributing to lowering income inequality, might contribute to a mild increase in
wealth inequality and vice versa. Plausible changes in income tax are found to have an
insignificant effect on wealth inequality, in practice. In addition, controlling the income
inequality, by progressive taxation, for example, is found to have a very small effect on
wealth inequality in the short run. The results imply, therefore, that controlling income
inequality is an impractical tool for regulating wealth inequality.
Introduction
The surge in wealth inequality is one of the most disturbing social and economic issues of our
time. The rapid increase in wealth inequality has generated much effort to understand the origin and possible control of this trend [1–7]. For a comprehensive review of historical theories
and analyses of wealth inequality please refer to [6]. Wealth inequality is generally thought to
impose instabilities on economies and on the social structure of countries [6, 8–10]. In most
western countries, in which wealth inequality had dramatically increased during the past 30
years, personal savings had substantially decreased [7, 11]. This decrease was found to be one
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Wealth Inequality and the Income Distribution Effect
of the major origins of the recent surge in inequality [7, 12–14]. As a consequence, it might be
possible to apply an economic policy leading to the reduction of wealth inequality in the future.
In addition to wealth inequality, income inequality had increased dramatically in the past
few decades in many countries. These two types of inequality are closely related and are positively correlated, as labor income is a major source of wealth. Fig 1 depicts the historical trend
of wealth and income inequality in the US during the past 8 decades. However, despite the relation between these notions they still differ considerably. In several developed countries, such as
Denmark and Switzerland, income inequality is very low, while the wealth inequality is among
the highest in the western world [15–17]. The differentiation between income and wealth
inequality is important, since affecting one might not necessarily affect the other and vice
versa. It is also important due to the confusion found at times between them in the media, and
even within the scientific community. Most of the research devoted to economic inequality is
focused on income inequality. It is usually easier to measure, and garnered massive media coverage and public attention in the past few years. We focus, however, on wealth inequality, as it
reflects better the real social and economic gaps within a society [18].
Wealth inequality is always higher than labor income inequality, due to income originated
from wealth (or capital income), such as rents, dividends or royalties and the increase of asset values [6]. This source of income accounts for a large portion of the national income ( 20%−35%
[11]), hence its substantial effect on wealth inequality. Additionally, though labor income
accounts for most of the national income produced in all western economies, only a relatively
small fraction of it contributes to accumulating personal wealth due to taxation and spending.
Fig 1. Historical economic inequality in the US. The Wealth (blue) and labor income (orange) inequality (pre-taxes) in the US for 1930–2010. The wealth
inequality is quantified by the share of wealth owned by the richest 10% of the population. The income inequality is measured using the Gini index [19]. Data
is taken from Piketty and Saez [3] and Saez and Zucman [20].
doi:10.1371/journal.pone.0154196.g001
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Wealth Inequality and the Income Distribution Effect
The specified differences between wealth and income inequalities join the imperfect correlation between wealth and income found in the US [21–23], of about 0.55–0.6 [18, 21, 23, 24].
This correlation implies that the effect of controlling the income distribution on the wealth distribution is limited. It also suggests that the recent wealth inequality surge is only partially
related to the income inequality surge, both depicted in Fig 1.
In order to determine the underlying mechanisms affecting wealth inequality, a quantitative
analysis is needed. We need to identify which of the factors that affect inequality play a major
role and which a secondary role. Such an analysis will provide necessary information for policy
making aiming to immediately suppress the soaring rate of wealth inequality and even further
reduce it in the future. In particular, we wish to estimate the effect of income tax and income
inequality on wealth inequality. Regardless of the imperfect correlation observed between
income and wealth, it had been suggested that “progressive taxation can powerfully affect
income and wealth concentration” [20, 25]. The immediate effect of income tax on income
inequality is rather clear, however, its effect on the distribution of wealth is intricate and
requires proper modeling.
Agent-based or individual-driven models for the dynamics of wealth accumulation have
been extensively studied recently [7, 12, 26–35]. Some of the models consider a strong interaction between agents within the population when addressing inequality, while in other model
types wealth exchange between individuals is incorporated in order to provide theoretical
insights on the shape of the wealth distribution, inspired by kinetic processes in gases. Other
models emphasize the importance of intergenerational elasticity and inheritance. Most of the
proposed models consider the multiplicative nature of wealth accumulation and treat wealth as
a stochastic process [7, 34, 36].
Here, we present a new model devised to study the dynamics of the wealth inequality, solved
using multiple iterated maps. We incorporate in the model published information regarding
the personal wealth, disposable income, personal savings and income inequality as the parameters that govern these dynamics. The model provides a theoretical framework to quantify the
contributions of the factors affecting the wealth inequality and offers a valuable test-bed for
predicting the effect of various policies on wealth inequality. It is loosely related to the model
presented in [7], however, it includes substantial changes, refinements and improvements.
By implementing the model using a numerical simulation and considering the historical
data for the different parameters in the US economy from 1930 to 2010, we compared and
found an excellent agreement between the model and the historical dynamics of wealth
inequality over this long period of time. The model can therefore be used as a predictor too,
thus contributing to the analysis of the relative effect of the various parameters on future wealth
inequality. It can be used to test which of the mechanisms that govern the dynamics of wealth
inequality is primarily associated with the recent surge. Such an analysis could also provide
insights on processes which might lead to the reduction of wealth inequality. Although the
analysis was mainly done for the US economy, we present its general implications and discuss
the validity of the results for different types of economies.
Model
We devise a model for the dynamics of wealth inequality. The model describes wealth accumulation of individuals within a population from 3 sources:
1. Labor income—accounts for the income originated from wages and earnings. Only a fraction of the labor income contributes to the accumulated wealth, due to taxation and
spending.
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Wealth Inequality and the Income Di...