11 år sedan
What do rich people do with their money?
The increasing incomes for the top per cent of income earners should have led to higher investment rates in the real economy. Since the 1970s, this group of people has substantially increased their share of the income in the OECD. In the report “What do rich people do with their money” from Global Challenge, Sandro Scocco, chief economist at Global Challenge, and Lars- Fredrik Andersson, senior lecturer in economic history at the University of Umea, present statistical analyses on the connection between the increased income shares of that small group of rich people, and the investment growth. The analysis shows that not only is there no positive connection between them, but that the opposite is true.
Does the higher difference in incomes lead to increased growth and lower unemployment? Can this rich group be stimulated to invest and create growth? Theories and estimations have long existed which say that this rich percentage can create more growth and lower unemployment. This has led to the attempt of many countries to stimulate this exact group through lower taxes and deregulations in combination with lower levels of compensation in the social insurance system, in order to increase people’s will to work.
But this is being questioned more and more today. The unemployment hasn’t decreased and the indebtedness of both the state and the households has substantially increased. We can add to this the distressful and substantial increase in income differences, which in theory should have led to an increased share of investments in the real economy.
In the figure which follows we can see the relationship between the investment share of GDP and the income share of the top 1-% per cent of income earners, for 14 OECD countries, during the period 1970-2008. It shows that the income share of this small group has a slightly negative relationship with the investment share in the 14 OECD countries.
