Technology and Inequality: reasons for concern, reasons ... · Technology and Inequality: reasons...
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Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Technology and Inequality: reasons for concern, reasons for
optimism Mark Stabile
Stone Chaired Professor of Wealth Inequality Professor of Economics
INSEAD
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Outline
• What’s the inequality problem?
• What’s worked in the past and what’s not working now?
• What’s going to happen next?
• How do we think about inequality and digital transformation?
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
The Global Financial Crisis & Recovery
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Real GDP Growth Rates
Japan United Kingdom United States EU-27
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Recovery has not been equal…
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Source: Authors calculations based on data from The World Wealth and Income database
United States: Distribution of Average Income Growth during Periods of Expansions - Bottom 99: Top 1 [1949-2013]
Bottom 99 Top 1
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
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Top 1% Income Shares in the US with and without Capital Gains [1913-2013]
Top 1% Income Share-Capital Gains Excluded Top 1% Income Share-Capital Gains Included
Source: Author’s calculations using World Wealth and Income Database
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017 Author’s calculations from WWI database
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Data from OECD Stat and The World Wealth and Income Database
UK-Top 1% Income Share [1951-2013]
UK-Top 1% income share-married couples & single adults
UK-Top 1% income share-adults
Digital Transformation: A force for a better world?
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DatafromOECDStatandTheWorldWealthandIncomeDatabase
France- Top1%IncomeShareandGini[1915-2011]
France- Top1%incomeshare
Digital Transformation: A force for a better world?
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Why the rise?
• Combination of market forces and policy choices
– Increased globalization
– A decline in top marginal tax rates
– Changes in bargaining and political power
– Skill bias technological change and the return to labor
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Connecting inequality and social mobility
• Does the “American Dream” still exist?
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Mobility in the OECD
Intergenerational income elasticities among men
Larger number means less mobility
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
The Fading American Dream
Chetty et al (2016)
Digital Transformation: A force for a better world?
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Corak, 2011
Larger number means less mobility
Corak, 2013
Digital Transformation: A force for a better world?
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Recent responses to inequality coupled with stagnant
growth in the middle
• We are seeing movement away from traditional public policy responses toward protest oriented responses.
• People feel insecure (economically and physically) and are reacting to that insecurity.
• Occupy movement • Brexit • Trump • The growth of far right political parties • What’s next?
Digital Transformation: A force for a better world?
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Is Business A Force for Good?
Source: Branko Milanovic
Change in real income between 1988 and 2005 (in 2005 international dollars)
Rise of the 1%
Decline of the middle class in rich countries India
China … catch-up
The very poor
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Technology and Inequality
• What’s the connection between technology and inequality?
• Skill-biased technological change explanation from above.
• Does well at explaining some periods. Not others.
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Technological changes over the past century
Source: Card and Dinardo, 2002
Digital Transformation: A force for a better world?
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“The race between education and technology”
Source: Acemoglu and Autor, 2012
Digital Transformation: A force for a better world?
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Up to 1.2 billion workers automated?
Digital Transformation: A force for a better world?
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McKinsey, 2016
Digital Transformation: A force for a better world?
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“We are being afflicted with a new disease of which some readers may not have heard the name, but of which they will hear a great deal in the years to come — namely, technological unemployment.”
Keynes, 1930
Digital Transformation: A force for a better world?
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Employment growth is greater when there are more job titles…
Acemoglu and Restrepo, 2016
Digital Transformation: A force for a better world?
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But how does this effect inequality?
• If new tasks are more complex, they will favor high skilled workers, leaving others behind.
• If, over time, these skills become more available to all workers, there will then be catch up (e.g. computers).
• But… “over time” is a key part of the analysis.
• The same people that are currently losing work are not (for the most part) the ones that will get the new jobs.
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
So what do we do?
• Innovation and transformation will, of course, continue. • Some will (hopefully) even help instead of hurt inequality. • Need to couple this with interventions that will preserve innovation while managing
inequality and labor market disruption. – Basic income – Changes in education – Redistribution (both to curb inequality and to fund the above)
Digital Transformation: A force for a better world?
Alumni Forum Europe 2017
Thank you.
Mark Stabile
Stone Chaired Professor in Wealth Inequality and Professor of Economics