Rising top incomes do not raise the tide

This paper examines the long-run relationship between top income shares and economic growth for a panel of nine high-income countries over the period from 1961 to 1996. We use panel cointegration and causality techniques that are robust to omitted variables, slope heterogeneity, and endogenous variables. Our main findings are that an increase in the top decile of income share reduces growth, and that long-run causality also runs in the opposite direction from economic growth to top income shares. (C) 2013 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.