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Missing the Story: The OECD's Analysis of Inequality

Author

Listed:
  • David Rosnick
  • Dean Baker
Abstract
The OECD recently published a lengthy volume examining the causes of rising inequality in most wealthy countries over the last three decades. This paper examines that study, finding that the OECD misses most of the story of inequality because its primary focus is the ratio of the annual wage of the 90th percentile worker to the 10th percentile worker, while most of the benefits of rising inequality were concentrated much further up the income ladder. In contrast to the OECD, this paper finds that the impact of technology is negligible and actually trivially negative over the period examined. It also finds many errors in the use of data in the OECD’s study, most importantly by exaggerating the number of independent observations when many of the data points are simply extrapolations. This causes the OECD to exaggerate the statistical significance of its findings. Finally, this paper suggests that the growth of the financial sector may have been an important factor contributing to the growth in inequality over the past 30 years.

Suggested Citation

  • David Rosnick & Dean Baker, 2012. "Missing the Story: The OECD's Analysis of Inequality," CEPR Reports and Issue Briefs 2012-19, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2012-19
    as

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    File URL: http://www.cepr.net/documents/publications/oecd-2012-07.pdf
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    Citations

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    Cited by:

    1. Daniel Detzer, 2015. "Inequality and the Financial System— The Case of Germany," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 585-608.
    2. Daniel Detzer, 2015. "Inequality and the Financial System— The Case of Germany," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 585-608.
    3. Szymborska Hanna K., 2016. "Financial Sector Transformation and Income Inequality-An Empirical Analysis," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 12(2), pages 36-48.
    4. David Rosnick, 2013. "Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages," CEPR Reports and Issue Briefs 2013-14, Center for Economic and Policy Research (CEPR).
    5. repec:ilo:ilowps:485244 is not listed on IDEAS
    6. Robert Scott & Steven Pressman, 2013. "Household Debt and Income Distribution," LIS Working papers 589, LIS Cross-National Data Center in Luxembourg.
    7. Henrik Braconier & Jenifer Ruiz-Valenzuela, 2014. "Gross Earning Inequalities in OECD Countries and Major Non-member Economies: Determinants and Future Scenarios," OECD Economics Department Working Papers 1139, OECD Publishing.

    More about this item

    Keywords

    inequality; financial services;

    JEL classification:

    • D - Microeconomics
    • D6 - Microeconomics - - Welfare Economics
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D3 - Microeconomics - - Distribution
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O - Economic Development, Innovation, Technological Change, and Growth
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services

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