TY  - JOUR
AU  - Gabaix, Xavier
AU  - Lasry, Jean-Michel
AU  - Lions, Pierre-Louis
AU  - Moll, Benjamin
TI  - The Dynamics of Inequality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 21363
PY  - 2015
Y2  - July 2015
DO  - 10.3386/w21363
UR  - http://www.nber.org/papers/w21363
L1  - http://www.nber.org/papers/w21363.pdf
N1  - Author contact info:
Xavier Gabaix
Department of Economics
Harvard University
Littauer Center
1805 Cambridge St

Cambridge, MA 02138
E-Mail: xgabaix@fas.harvard.edu

Jean-Michel Lasry
Université Paris Dauphine, Institut de Finance
Place du Marechal de Lattre de Tassigny
75775 Paris Cedex 16, France
E-Mail: 2007lasry@gmail.com

Pierre-Louis Lions
College de France
Rue d’Ulm 3
75005 Paris Cedex 05, France
E-Mail: pierre-louis.lions@college-de-france.fr

Benjamin Moll
London School of Economics
Houghton Street
London WC2A 2AE
United Kingdom
Tel: 609/258-0329
E-Mail: b.moll@lse.ac.uk
AB  - The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tails of the income and wealth distributions at a given point in time, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are an order of magnitude too slow relative to those observed in the data. We then suggest parsimonious deviations from the basic model that can explain such changes, namely heterogeneity in mean growth rates or deviations from Gibrat's law. These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of "superstar" entrepreneurs or managers.
ER  -