NEW: Inequality and Redistribution in France, 1990-2018: Evidence from Post-Tax Distributional National Accounts, with Antoine Bozio, Bertrand Garbinti, Malka Guillot, and Thomas Piketty, WID.world WORKING PAPER SERIES N° 2018/10
Abstract: This paper presents post-tax Distributional National Accounts (DINA) for France. That is, we combine national accounts, tax and survey data in a comprehensive and consistent manner to build homogenous annual series on the post-tax, post-transfer distribution of national income by percentiles over the 1990-2018 period, with detailed breakdown by age, tax and transfer categories. We come with three main findings. First, taxes and transfers reduce total income inequality (as measured by the ratio between average incomes of the top 10% and bottom 50% groups) by 23% on average in France over this period. This is significant, but less than in the US (34%). The reason why overall inequality is much smaller in France than in the US (more than twice as small, according to this indicator) is entirely due to differences in pretax inequality (themselves due to a complex combination of factors: access to education, wage formation, etc.) rather than in secondary redistribution (i.e. policies affecting the gap between the pretax distribution and the post-tax post-transfer distribution of income). Next, due to the large role of indirect taxes, social contributions, and income capital exemptions, the overall profile of taxation is structurally regressive in France (i.e. very top groups pay lower effective tax rates than groups just below them), a feature that has been reinforced in 2017-2018. Third, monetary transfers benefit mostly older age groups in France, and leave unaffected the low relative position of younger age groups. These series are currently being extended to cover the entire 1900-2018 period and to better take into account in-kind transfers.
REVISED: Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France, with Bertrand Garbinti and Thomas Piketty, WID.world Working Paper N° 2016/05. Revised and Resubmit to the Journal of European Economic Association.
Abstract: This paper studies the evolution and the determinants of wealth inequality in France over the 1970-2014 period. We combine fiscal data with household surveys and national accounts in order to deliver annual wealth distribution series, with detailed breakdowns by percentiles, age and assets. We also estimate and analyze the joint distribution of income and wealth, as well as the determinants of wealth inequality dynamics such as rates of return, saving rates, and rates of capital gains by wealth groups. We show that the decline in wealth inequality ends in the early 1980s, marking the beginning of a rise in the top 1% wealth share, though with significant fluctuations due to asset price movements. Rising inequality in saving rates and rates of return have led to rising wealth concentration in spite of the contradictory effect of house price increases. We develop a simple simulation model highlighting how changes in the combination of unequal saving rates, rates of return and labor earnings that occurred in the early 1980s generate large multiplicative effects led to radically different steady-state levels of wealth inequality. Taking advantage of the joint distribution of income and wealth, we show that top wealth holders are almost exclusively top capital earners, and less and less made up of top labor earners; it has become increasingly difficult in recent decades to access top wealth groups with one’s labor income only.
FINAL: Behavioral Responses to Inheritance Tax: Evidence from Notches in France, with Arturo Infante, Journal of Public Economics, 2018, 168: 21-34.
Abstract: For the first time, we exploit quasi-experimental variations to investigate the impact of inheritance taxation on wealth accumulation. Using the French preferential tax scheme for inheritance, we take advantage of unique age and time discontinuities to estimate different behavioral responses to taxation. These responses are estimated directly during lifetime, rather than relying solely on observations at death. The analysis is based on a longitudinal data set of preferential tax savings from Axa over the period 2003-2013. We obtain two main results. First, we estimate timing responses using a bunching approach. Second, we use a difference-in-differences approach to estimate real and shifting among asset portfolio responses at the individual level. We document the presence of important, but relatively small, responses to inheritance taxation. Our empirical findings shed a new light upon wealth accumulation and bequest motives. Taken together, our results cannot be supported by the desire to retain control over wealth. We argue that small responses to inheritance tax could be better explained by psychological factors such as myopia or denial of death. Our results call for more sophisticated models incorporating psychological biases into wealth accumulation and bequest decision.
Income Inequality in France, 1900-2014: Evidence from Distributional National Accounts (DINA), with Bertrand Garbinti and Thomas Piketty, Journal of Public Economics, 2018, 162: 63-77.
Abstract: This paper presents "Distributional National Accounts" (DINA) for France. That is, we combine national accounts, tax and survey data in a comprehensive and consistent manner to build homogenous annual series on the distribution of national income by percentiles over the 1900-2014 period, with detailed breakdown by age, gender and income categories over the 1970-2014 period. Our DINA-based estimates allow for a much richer analysis of the long-run pattern found in previous tax-based series, i.e. a long-run decline in income inequality, largely due to a sharp drop in the concentration of wealth and capital income following the 1914-1945 capital shocks. First, our new series deliver higher inequality levels than the usual tax-based series for the recent decades, because the latter miss a rising part of capital income. Growth incidence curves look dramatically different for the 1950-1983 and 1983-2014 sub-periods. We also show that it has become increasingly difficult in recent decades to access top wealth groups with labor income only. Next, gender inequality in labor income declined in recent decades, albeit fairly slowly among top labor incomes E.g. female share among top 0.1% earners was only 12% in 2012 (vs. 7% in 1994 and 5% in 1970). Finally, we find that distributional changes can have large impact on comparisons of well-being across countries. E.g. average pre-tax income among bottom 50% adults is 30% larger in France than in the U.S., in spite of the fact that aggregate per adult national income is 30% smaller in France.
Applying Generalized ParetoCurves to Inequality Analysis, with Thomas Blanchet, Bertrand Garbinti and Clara Martinez Toledano, American Economic Association Papers and Proceedings, 2018, 108: 114–118.
Abstract: A generalized Pareto curve is defined as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income or wealth above rank p and the p-th quantile. We present this concept and show how it can be used to better estimate distributions, especially from tax tabulations. By providing a simple decomposition of top shares, we discuss how studying inverted Pareto coefficients can improve the understanding of inequality dynamics. We also show how it helps to better analyze wealth and income concentrations along the distribution, using data for France, Spain, the United States and China.
The Impact of Inheritance and Transfer Taxation on Economic Behaviors and Inequality: a Literature Review for France, with Bertrand Garbinti, Ifo DICE Report 2/2018 (June): 13-18, 2018.
Articles in French:
Combien ont coûté les réformes de l’impôt sur les successions mises en place en France depuis 2000 ?, [Inheritance tax reforms in France: How much did they cost since 2000?], Revue économique, 2016, 67(4), p. 913-936.
Impact des droits de succession sur le comportement d'accumulation du patrimoine, avec Arturo Infante, Revue française d'économie, 2016/1 (Volume XXXI), p. 187-206.
Dissemination of scientific knowledge:
- Income inequality in France: Economic growth and the gender gap, VoxEU, with Bertrand Garbinti and Thomas Piketty.
- The evolution of wealth inequality in France from 1800 to 2014, Rue de la Banque, 2018, with Bertrand Garbinti.
- Trois decennies d’inégalités et de redistribution en France (1990-2018), Note WIL-IPP, 2018, avec Antoine Bozio , Bertrand Garbinti, Malka Guillot et Thomas Piketty.
- Inégalités de patrimoine en France : quelles évolutions de 1800 à 2014 ?, Rue de la Banque, Variances, 2018, avec Bertrand Garbinti.
- Inégalité de revenus et de patrimoine : l’envolée récente des très hauts patrimoines et revenus, avec Bertrand Garbinti, Cahier Français, No. 400, 2017.
- Budget 2013 : la réforme de l’impôt sur le revenu, [French Budget 2013: Income Tax Reform], avec Antoine Bozio, Brice Fabre et Quentin Laffeter, Note IPP, No. 2, octobre 2012.
- Fiscalité et redistribution en France, 1997-2012, [TAXIPP analyses 15 years of tax policies in France], avec Antoine Bozio, Roy Dauvergne, Brice Fabre et Olivier Meslin, Rapport IPP, No. 1, mars 2012.