Elite incomes around the world: command over tradables, nontradables and labour

Segal, Paul and Moatsos, Michail (2024) Elite incomes around the world: command over tradables, nontradables and labour. Journal of Economic Inequality. ISSN 1569-1721

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Abstract

This paper shows that cross-country comparisons of elite incomes vary widely and systematically depending on the conception of real income used. It is well known that between-country income inequality is higher using market exchange rates than PPP exchange rates, due to a combination of traded sector bias and the Balassa-Samuelson effect, and we empirically confirm that this is the case for comparing top 1 percent incomes across countries. In contrast, we argue that measuring real incomes of elites using entitlements over labour (ELs), which take local wage costs as the numeraire, leads to the opposite effect: since the non-traded sector is relatively labour-intensive, incomes in the sense of ELs demonstrate non-traded sector bias relative to PPP incomes. They therefore provide a complement, or opposite bound, to the traded-sector bias of market exchange rates. Consistent with this argument, we find that between-country inequality among the world’s national elites is indeed lower using ELs than either PPP or market exchange rates. But elite incomes in ELs do not merely converge: elites in poorer countries leapfrog or overshoot their rich country counterparts, enjoying higher real incomes in terms of their command over domestic labour.

Item Type:	Article
Additional Information:	© 2024 The Author(s)
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions E - Macroeconomics and Monetary Economics > E0 - General > E01 - Measurement and Data on National Income and Product Accounts and Wealth
Date Deposited:	19 Nov 2024 14:42
Last Modified:	02 Dec 2024 14:03
URI:	http://eprints.lse.ac.uk/id/eprint/126101

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