Working Paper: NBER ID: w12558
Authors: Chiaki Moriguchi; Emmanuel Saez
Abstract: This paper studies the evolution of income concentration in Japan from 1886 to 2002 by constructing long-run series of top income shares and top wage income shares, using income tax statistics. We find that (1) income concentration was extremely high throughout the pre-WWII period during which the nation underwent rapid industrialization; (2) a drastic de-concentration of income at the top took place in 1938-1945; (3) income concentration has remained low throughout the post-WWII period despite the high economic growth; and (4) top income composition in Japan has shifted dramatically from capital income to employment income over the course of the 20th century. We attribute the precipitous fall in income concentration during WWII primarily to the collapse of capital income due to wartime regulations and inflation. We argue that the change in the institutional structure under the occupational reforms made the one-time income de-concentration difficult to reverse. In contrast to the sharp increase in wage income inequality observed in the United States since 1970, the top wage income shares in Japan have remained remarkably stable over the recent decades. We show that the change in technology or tax policies alone cannot account for the comparative experience of Japan and the United States. Instead we suggest that institutional factors such as corporate governance and union structure are important determinants of wage income inequality.
Keywords: income concentration; Japan; income tax statistics
JEL Codes: H24; N15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wartime regulations (H56) | Deconcentration of income (D31) |
| Inflation (E31) | Deconcentration of income (D31) |
| Destruction (H84) | Deconcentration of income (D31) |
| Post-war reforms (N44) | Stability of low income concentration (D30) |
| Progressive taxation (H29) | Stability of low income concentration (D30) |
| Changes in corporate governance (G38) | Stability of low income concentration (D30) |
| Institutional factors (D02) | Wage income inequality (J31) |
| Technological changes or tax policies (O33) | Wage income inequality (J31) |