The purpose of this article is to explain and analyze long-term trends in economic inequality within developed countries since the Industrial Revolution. This essay focuses on inequality within countries with the aim of reducing its scope, but also because of the lack of consensus in the literature regarding global trends in inequality, due to different data sources and research methods . Studying economic inequality within a country also allows for a better empirical assessment of the role of markets and shocks at the national level. Focusing on high-income countries (with similar technological and productivity developments) helps shed light on the role of institutional and policy differences that explain the reasons underlying different patterns of income inequality, particularly in summit. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay This essay will use the Kuznets wave concept developed by Milanovic in response to two of the most important analyzes of long-term trends in economic inequality developed by Kuznets and Piketty. The first Kuznets wave occurred from the start of the industrial revolution until around the 1980s, and the second from the 1980s. Both waves are characterized by a period of rising inequality (in the first wave, inequality peaked between the end of the 19th century and the beginning of the 20th century), followed by a decrease. This article will first demonstrate that changes in inequalities were influenced by wars and the political choices that resulted from them. Next, it will analyze the role of capital and taxation in determining long-term trends in economic inequality. Finally, it will demonstrate that the labor market and bargaining power have historically had an impact on economic inequality. Changes in economic inequality have been influenced by wars and subsequent political changes. Historically, war has been recognized as a factor of economic equality. According to Ricardo, government financing of war, particularly through taxation of the rich, increases employment (e.g. of soldiers), raises wages and reduces economic inequality. Piketty argues that there was no structural decline in inequality before World War I and that economic inequality stabilized at a very high level between 1870 and 1914. Kuznets considers the sharp decline in inequality in the United States between 1913 and 1948 (the richest 10% ranging from claiming 40-45% of annual national income to 30-35% during this period) as being due to the shocks of the Great Depression and World War II. Piketty offers a political theory to explain the process by which the two world wars reduced economic inequality within rich countries. According to him, wars led to increased taxes, as well as the destruction of property and the reduction of great fortunes. For example, he argues that the concentration of capital declined irreversibly after the wars, because the greatest French fortunes and the most valued estates around the year 2000 were worth even less than before 1914. Furthermore, endogeneity wars is an important aspect to consider. by analyzing the relationship between war and economic inequality. According to Milanovic, the outbreak of the Great War and the reduction in inequality after the war should not be analyzed as an exogenous shock reducing economic inequality. The First World War broke out inan environment characterized by high domestic inequality, high savings among the rich, weak aggregate demand, and the search for new sources of profits that require control by other countries. Therefore, war should be endogenized in the economic conditions that preceded it. Furthermore, policies adopted following the shocks of war constitute another aspect of the reduction in inequality of the first Kuznets wave (from the industrial revolution to the 1980s). Piketty argues that alongside the shocks of war, the shock of war following the socialist and communist parties that led to pro-labor legislation contributed to the decline in inequality. Furthermore, Milanovic considers social pressure exerted by politics (socialism and trade unions), the need for social protection (resulting from the aging population), as well as widespread education, as prominent forces that caused inequality to decline after the First World War. , as Goldin and Katz argue, was effective in reducing inequality during the first Kuznets wave, because the inequality-reducing effect of education was greater than the inequality-increasing effect of biased technological change in skills (which became the largest effect after the 1980s). These policy changes thus helped to reduce economic inequality within rich countries until the 1980s. Therefore, the shocks of wars as well as the political changes that followed played an important role in reducing economic inequality during of the first Kuznets wave. Changes in economic inequality in advanced economies have also been shaped by capital accumulation and changes in fiscal policy. Capital plays an important role in explaining long-term trends in inequality in advanced economies. The reduction in economic inequality during the first Kuznets wave was characterized by a decrease in the share of capital income: the United States experienced a 17% decline in the share of capital income between 1916–1939 and 1987 -2010; while in the United Kingdom, it fell from 60% in 1937 to 20% in 2000. However, according to Bourguignon, since 1980, the share of capital income has increased faster than that of labor (i.e. -say salaries). This can be partly explained by new technologies that increase the share and return of capital. Moreover, as capital income has become increasingly concentrated, wealth concentration has become a related problem. The change in top income shares largely reflects changes in capital income flows. Based on market income per family before taxes and before transfers declared in tax returns, the share of total annual income received by the richest 1% more than doubled, from 9% in 1976 to 20% in 2011 . of the richest 1% has had a notable effect on overall income inequality in the United States. Furthermore, according to Piketty, this increase in inequality reflects important information: the return of high capital income ratios since the 1980s is largely explained by the return to a regime of relatively slow growth which increases the risk of divergence in the distribution of wealth. Indeed, in a slow growth regime, past wealth takes on disproportionate importance (because a small flow of new savings is enough to increase the stock of wealth) and the rate of return on capital often remains significantly higher than the rate of return. growth. Fiscal policy plays a crucial role in determining inequality trends. The fact that countriesHigh income characterized by similar technological and productivity developments experienced different patterns of income inequality at the top supports the idea that institutional and policy differences – particularly differences in fiscal policy – ​​play a key role in these transformations. After 1945, tax rates on top incomes were much higher than today (for example, U.S. tax rates in 2010 were half those in the 1950s), which explains the lower share of the highest incomes at the time. Tax reforms carried out in the name of economic liberalization reduced the top marginal tax rate from 70% to 40% in the United States under the Reagan administration (1980-1984) and in the United Kingdom, from 83 % to 60% during the Reagan administration. the very first year of the Thatcher government. These reforms led to an increase in pre-tax income (and their share and concentration) and the expansion of financial services. Additionally, due to globalization and information technology, capital has become increasingly mobile, making it more difficult to accurately collect taxes – particularly from the wealthy – thereby perpetuating inequality. Therefore, the rise in inequality after 1980 can be partly attributed to capital accumulation of income, particularly among high earners, as well as fiscal policies. Finally, changes in the labor market and bargaining power have historically impacted trends in economic inequality. The impact of unionization on income distribution – although heterogeneous across countries and often endogenous with respect to income inequality – is an interesting aspect to take into account when studying long-term inequality trends. Since the 1980s (i.e. the start of the second Kuznets wave), the development of the service sector has led to a wider physical distribution of employment, making it increasingly difficult for workers to organize to organize or less relevant, thus leading to less unionization. density. The decline in popularity of unions can also be attributed to the Thatcher and Reagan administrations, greater competition reducing the practicality and success of unions in negotiations with employers, and disinflation, which leads to individual wage negotiations that guarantee greater individual utility compared to collective bargaining, which are often based on changes in inflation. In the case of the United States, Freeman attributes 20% of the rise in male income inequality to deunionization and, examining the experience of all workers in 16 OECD countries during the 1980s, shows that the rise in income inequality at the industry level has been This phenomenon is less pronounced in highly unionized countries. Furthermore, the transition to service economies has led to the creation of extremely well-paid jobs, particularly in the financial sector, which enjoy high bargaining power, exacerbating inequality. The deregulation and globalization of finance have had a significant unequal effect: in France and the United Kingdom, the financial sector represents 5% of jobs, but 18% of very high incomes. Financial liberalization has increased the profitability of financial wealth through an outsized expansion of investment opportunities and in part by inflating the remuneration of the minority who lead and manage these innovations. It is important to note that as the density and bargaining power of unions declined, the bargaining power of those at the.