Wealth, wage, and income inequality:selected issues

Since the 1990s, the issue of inequality has gained considerable attention among social scientists. The literature on causes and consequences, as well as the measurement and international comparisons of income inequality, has flourished. Inequality in wages, for instance between men and women, urban and rural workers, or people of different races, has also been extensively studied by labour economists. Contrary to that, due to the lack of appropriate data, the microeconomic literature on wealth inequality remained scarce up to the 2000s. Wealth inequality study still stays behind income inequality study, although it largely caught up. The present dissertation aims to fill some gaps in the empirical literature regarding wealth, wage, and income inequality. It consists of five scientific articles: two of them focus on wealth inequality, one on top wealth, one on a special case of wage inequality, and one – the broadest in terms of the scope – on both income and wealth inequality and their relationship with individual-level subjective well-being. Geographically, the first two concentrate on Central and Eastern Europe, the region, which is still under-researched in this respect. Then, the next two focus specifically on Poland, while the last one aims to present a worldwide perspective. Paper 1, entitled “Wealth inequality in Central and Eastern Europe: Evidence from household survey and rich lists’ data combined” and published in Economics of Transition and Institutional Change (co-authored with Michał Brzeziński and Marcin Wroński), estimates top corrected wealth inequality in selected Central and Eastern European countries. We show that the problem of the “missing rich” in household surveys severely underestimates wealth inequality statistics. We impute the missing observations for the largest wealth values fitting Pareto distribution to the joined survey and rich lists’ data and provide the first estimates of the top-corrected wealth for Estonia, Hungary, Latvia, Poland and Slovakia. Our results show that wealth inequality in the Baltic countries is comparable to that of Germany (one of the most wealth-unequal countries in Europe), while in Poland and Hungary it has reached levels observed in France or Spain. In Paper 2, entitled “Factors that account for the wealth inequality differences between post socialist countries” and published in Economic Modelling (co-authored with Michał Brzeziński), we investigate significant cross-country differences in wealth inequality in the region. Using decomposition methods, we find that the most important short-term factor accounting for the differences in wealth inequality levels among the Central and Eastern European countries is homeownership. Factors such as employment, income, or gifts and inheritances, seem to be negligible. Paper 3, entitled “Political connections and the super-rich in Poland” and published in Economic Systems (co-authored with Michał Brzeziński), examines top wealth in Poland. We study the impact of political connections of the richest Poles on their wealth level, mobility among the rich, and the risk of dropping off the rich list. Contrary to some expectations, we find that none of the variables capturing political connections of Polish multimillionaires is consistently related neither to the size of the largest fortunes in Poland nor to the chances of upward mobility on the rich list. We conclude that there is little evidence that the Polish economy suffers from crony capitalism. Paper 4, entitled “Gender pay gaps in domestic and foreign-owned firms” and published in Empirical Economics (co-authored with Iga Magda), also focuses on Poland, but in the labour market context. We investigate differences in gender wage gaps between foreign-owned and domestically owned firms in Poland and find that the adjusted gender wage gaps are larger among employees working in the foreign-owned sector than in the domestic one. We also find that in the foreign-owned sector, the returns to individual, job, and firm characteristics earned by women are much lower than the returns earned by men, but that the foreign-owned firms appear to pay higher firm-specific wage premia to women than to men, thereby narrowing within-firm gender wage inequality. These patterns differ from those observed in the domestic sector, in which firm wage premia tend to widen within-firm wage distributions and contribute to the overall level of gender wage inequality. Finally, Paper 5, entitled “Wealth inequality, income inequality and subjective well-being: a cross-country study” adopts a global perspective and investigates the relationship between country-level inequality and individual subjective well-being. We find that individuals experience higher levels of happiness with increases in the top 10% and top 1% shares of wealth, but they are less happy with increases in the middle 40% share of either wealth or pre tax income. Additionally, increasing the bottom 50% share of post-tax income leads to greater happiness among individuals, suggesting a preference for income redistribution. The present dissertation aims to add empirical evidence to various strands of the empirical literature on inequality, focusing the most on the wealth dimension, but at the same time trying not to neglect other dimensions of inequality. It brings some new results and possibly sheds some new light on inequality-related phenomena.