Monday, May 11, 2015

Krugman On "Explaining US Inequality Exceptionalism"

Here is the link.

Not sure if I understand what he is trying to say. What if we look at the USA and the following 6 countries

UK
Australia
Canada
France
Germany
Italy

Those are, I think, the most comparable to the USA since they are fairly large. Before taxes and transfers, for all ages, their average Gini (G) is .512. The USA is .52. But for all ages, after taxes and transfers, those six are .317. The USA is .37. We go from almost no difference to a difference of .053.

But if we look at under 60, before taxes and transfers, those six have .418 and the USA has .47. So the difference is .052. After taxes and transfers for those under 60, for those six, they have .33. We have .37.

So for the under 60 crowd, after taxes and transfers, the USA is closer to those six (with a difference of only .04) than it is for all ages (where the difference is .053)

Is that what Krugman is trying to say, that the USA is doing more equalizing for the younger crowd than overall? Another way to say it is that the USA has a bigger drop in G after taxes and transfers for the under 60 crowd compared to all ages than does those other six countries.

If you look at the G before taxes and transfers for the under 60 crowd, the USA has .47 and the other six have .418. Is that difference of .052 significant? Gini goes from a scale of 0 to 1, so maybe it is. But I probably don't even know how to evaluate it in terms of significance. Is one of those numbers closer to whatever is optimal (if anyone has figured that out?)

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