in: Review of Income and Wealth 66 (1), 126-160
We investigate the causal relationship between the growth rate of top income shares and economic growth in 12 OECD economies for the period 1950–2010. To analyze patterns of short- and long-run causality, we build upon recent advances in structural-vector autoregressive modeling of non-Gaussian systems. This framework allows us to discriminate between rival transmission channels by means of dependence tests, since independent shocks are unique for a particular causation pattern. We consider the share of income accruing to the top 1 percent, to the next 9 percent, and to the top decile. While structural models display considerable heterogeneity across countries, mean group and pooled results strongly favor a specific transmission pattern. In particular, has a long-run positive impact on economic development. This result, which is also confirmed by identified impulse-response functions, is particularly evident for the post-1980 period.