Our Mission & Expertise
Our team strives to gain a deeper understanding of the dynamics, causes and consequences of income and wealth inequality; contribute to the intellectual debate surrounding income and wealth inequality; and educate current and future business leaders about the issues and implications of income and wealth inequality. To that end, we are focused on taking a novel approach to the study of income and wealth inequality. We examine the impact of the top of wealth and income distributions in countries and communities around the world and then transfer those insights to the INSEAD classroom. Through the creation of new courses and curriculum at INSEAD, we hope to change how MBA students think about - and potentially solve - income and wealth inequality problems.
To gain a more comprehensive picture of income and wealth inequality, our research team will examine it from a number of different angles while focusing specifically on problems created by rapid growth in the income and wealth held by the top 1%. We’ll study countries and communities across the globe, drawing upon macro-level data to better understand country-specific trends while looking at micro-level data to understand what’s happening at the level of the individual. In addition to looking at the impact of income and wealth inequality on different countries’ support systems or structures, we will explore how certain countries have successfully addressed or solved problems of wealth inequality.
We believe that tackling the problem of income and wealth inequality requires the cooperation and ingenuity of business leaders from around the globe. As a top business school with global reach, INSEAD is ideally equipped to bring this vision to reality. We have the opportunity to educate the next generation of business leaders — the individuals most likely to create or represent the top 1% of wealth holders in the future — about the challenges of income and wealth inequality and their potential role in solving them.
In The Spotlight
INSEAD Case Study
INSEAD Case Study
INSEAD Case Study
INSEAD Case Study
MBA Elective Courses
Research insights generated by the Centre directly inform our pedagogy on the topic of income and wealth inequality at INSEAD. The current course offering is listed below.
INSEAD activities in the field of wealth inequality were initiated thanks to a founding contribution from James M. and Cathleen D. Stone. Their support inspires and empowers INSEAD faculty, students and alumni around the globe, and is gratefully acknowledged.
Events and Seminars
Tasks, Occupations, and Wage Inequality in an Open Economy
Professor, University of California, San Diego
Abstract: This paper documents and theoretically explains a nexus between globalization and wage inequality within plants through internal labor market organization. We document that the dominant component of overall and residual wage inequality is within plant-occupations and, combining within-occupation task information from labor force surveys with linked plant–worker data for Germany, establish three interrelated facts: (1) larger plants and exporters organize production into more occupations, (2) workers at larger plants and exporters perform fewer tasks within occupations, and (3) overall and residual wages are more dispersed at larger plants. To explain these facts, we build a model in which the plant endogenously bundles tasks into occupations and workers match to occupations. By splitting the task range into more occupations, the plant assigns workers to a narrower task range per occupation, reducing worker mismatch while typically raising the within-plant dispersion of wages. Embedding this rationale into a Melitz model, where fixed span-of-control costs increase with occupation counts, we show that inherently more productive plants exhibit higher worker efficiency and wider wage dispersion and that economy-wide wage inequality is higher in the open economy for an empirically confirmed parametrization. Reduced-form tests confirm main predictions of the model, and simulations based on structural estimation suggest that trade induces a stricter division of labor at globalized plants with an associated change in wage inequality.
Does Better Information Reduce Gender Discrimination in the Technology Industry
Clementine Van Effenterre
Stone Visiting Faculty
Social Security Net, Rural-Urban Migration and Poverty Alleviation: Evidence from a Quasi-Experiment of Institutional Reform in Rural China
Professor of Economics, Sciences
Abstract: In this paper we explore a quasi-experiment that took place in China, in a typical poor rural county in China, Xin County in Henan Province. In this county they assigned county officials (outsiders) to poor villages in order to act as the village supervisors. This newly introduced institutional reform improved formal insurance and the local governance quality in the treated villages. We estimate the impact of this reform on the households’ migration choices and outcomes, most importantly income. We use the fact that the location of the village borders are exogenous and were determined many years ago to argue that the location of any households close to a border is random with respect to which side of the border it is located on, namely it is randomly assigned to the treatment. This random location determine whether or not a household is in a treated village. Combining this random assignment detailed administrative household-level data geo-referenced to the exact locations around the village borders allow us to identify causal effects of the institutional reform on important outcomes, using spatial regression discontinuity design. We find that: (a) the introduction of village supervisors can improve the efficiency and fairness of the formal insurance by diminishing within village favoritism; (b) the improvements in formal insurance decreases the spatial misallocation of labor by substantially increasing the out-migration of individuals from the the ultrapoor households to urban areas by about 19 percentage points for young males, and to a lesser degree for young females; (c) the out-migration helped the average poor household to increase the household income by more than 1700 CNY (or 36% of the annual minimum living standard) in only two years after the enactment of the reform; and (d) these forces served as the main drivers for the significant poverty alleviation in rural China from 2016 to 2020.
Robotization and Life Satisfaction: Evidence from South Korea’s Robotization Policy
Ludwig Maximilian University, Munich
The Impact of Corporate Taxes on Wage Inequality
PhD Candidate at Princeton University, Department of Economics and Research Assistant at College de France
Abstract: Is the corporate income tax a good instrument to curb income inequality? The answer to this question is not limited to the different incidence of this tax on capital and labor income. A closer look at the share of corporate tax burden that falls on labor reveals that it is unevenly distributed among workers. This paper argues that firm heterogeneity shapes this unequal distribution and, therefore, the consequences of corporate taxation on wage inequality and aggregate labor income. I develop a model featuring firm heterogeneity and imperfect competition in labor markets. The baseline parameterization generates a negative impact of corporate taxes on wage inequality. This result suggests that the progressivity of corporate taxation is accentuated by its heterogeneous effect on wages.
Larger Transfers Financed with More Progressive Taxes? On the Optimal Design of Taxes and Transfers
Assistant Professor, PSE
Abstract: We study the optimal joint design of targeted transfers and progressive income taxes. We develop a simple analytical model and demonstrate an optimally negative relation between transfers and income-tax progressivity, due to both efficiency and redistribution concerns. That is, higher transfers should be financed with lower income-tax progressivity. We next quantify the optimal fiscal plan in a rich dynamic model calibrated to the U.S. economy. Transfers should be generous and financed with moderate income-tax progressivity. To redistribute while preserving efficiency, tax-and-transfer rates should be more progressive on average than on marginal rates. Transfers, even if lump-sum, precisely allow to disentangle average from marginal rates. Targeted transfers further implement non-monotonic marginal rates, but generate only modest additional gains relative to a lump-sum transfer. Quantitatively, the left tail of the income distribution determines the optimal size of the transfer, while the right tail drives the optimal income-tax progressivity.
Do the Rich Flee Wealth Taxes? Evidence from Scandinavia
London School of Economics
Abstract: Despite looming large in the public debate on the desirability of progressive wealth taxes, remarkably little is known on the migration responses to such taxes. Using unique administrative data on wealth and mobility, as well as variation stemming from large tax reforms in Sweden and Denmark, we offer the first detailed account of the impact of such taxes on migration patterns of the very wealthy. We start by documenting that the yearly net outmigration rate was positive, but small (around 0.1%) when wealth taxes were in place in Scandinavia. We further investigate selection into outmigration, and show that, contrary to what is found in the population at large, there is no education nor cognitive and non cognitive skill gradient in migration among the very wealthy. Using a diff-in-diff design around large tax reforms like the abolition of wealth taxes in Sweden or Denmark, we find a strong significant response of migration flows to the net of tax rate. We also provide evidence of anticipatory effects by young individuals not liable to the wealth tax but likely to become liable in the near future. Despite large responses in migration flows, we find that the overall effect of wealth taxes on the stock of wealthy individuals is small, as the baseline migration flows are very tiny. Our most conservative upper-bound estimate, accounting for anticipatory effect, suggests that a 1 percentage point increase in the effective average tax rate on wealth reduces the population of wealthy Scandinavians by 5%.
Financial and Total Wealth Inequality with Declining Interest Rates
Stijn van Nieuwerburgh
Professor of Finance, Earle W. Kazis and Benjamin Schore Professor of Real Estate
Abstract: Financial wealth inequality and long-term real interest rates track each other closely over the post-war period. Faced with unanticipated lower real rates, households which rely more on financial wealth must see large capital gains to afford the consumption that they planned before the decline in rates. Lower rates beget higher financial wealth inequality. Inequality in total wealth, the sum of financial and human wealth and the relevant concept for household welfare, rises much less than financial wealth inequality and even declines at the top of the wealth distribution. A standard incomplete markets model reproduces the observed increase in financial wealth inequality in response to a decline in real interest rates because high financial-wealth households have a financial portfolio with high duration.
Rethinking the World and Finance After COVID-19: Do We (Seriously) Want to Change the world?
Inspector of Finances, HEC, Sciences Po