Martin, Thanks for posting. That was a very good article - one of Krugman's best ever.
However, one argument that Krugman did not address is that greater income inequality is mitigated by the fact that there is higher mobility between income quintiles or deciles. This mobility grew along with inequality, and the late 90s differed from the 1920's in this respect.
Further, measures of central tendency such as median and mean do not assess the effect of lifecycle on personal income. For example, from 1991 to 2000, my income increased sevenfold, since I was in graduate school in 1991, and six years into a career in 2000. At some point, my income will peak, and probably decline somewhat. Income can increase or decline because of age, lifestyle, family obligations, etc, and not just the presence of a structural defect in the economy.
As a result, the best way to study income inequality is through panel studies such as that conducted in the Fed's Survey of Consumer Finances, where one can study income inequality within a demographic cohort. I look forward to reading the results of the 2001 Survey, which are due to be released in February 2003.
Another issue Krugman did not address is that much of the income generated in the late 90s was due to ESOP grants to corporate officers. I suspect that a large portion of this "income" will never be realized. |
