Can rising inequality be a cause of fading hope? Evidence for the United States.

A large literature has discussed whether the increase in inequality over the last decade in Western industrial countries such as the United States (US) would lead to increasing tensions between socio-economic groups, social uprising and political change which might in turn hamper economic growth. The French economist Thomas Piketty had popularized the inequality issue. Now we know that inequality perceptions of population groups are behind major changes in the world, e.g. Brexit, Trump, the rise of popular movements in Europe and else.

A newly published paper by GLO Fellow Jo Ritzen and GLO President Klaus F. Zimmermann studies this issue with long-term data for the United States. They document fading hopes of the wider population about the long-term future as a decisive indicator of change:

Jo Ritzen and Klaus F. Zimmermann: Fading Hope and the Rise in Inequality in the United StatesEurasian Business Review, (2018) 8:1–12. LEAD ARTICLE. DOI: 10.1007/s40821-016-0071-3. UNU-MERIT Working Paper 2016-025  Prepublication. A very preliminary version of this paper was a DP already in 2012.

Both authors are Professors of Economics and are affiliated with UNU-MERIT and Maastricht University. Jo Ritzen was previously Dutch Minister for Education and Science and President of Maastricht University. Klaus F. Zimmermann was President of the German Institute for Economic Research (DIW Berlin), Founding Director of the Institute for the Study of Labor (IZA) and was recently affiliated with Harvard University and Princeton University.

The paper uses survey data for the US collected by the Pew Research Center for the People covering 1999–2014 documenting a long-run decline in hope. Over the first decade, the decline in hope cannot be traced back to the rising inequality. However, recent data from 2014 suggest that inequality is now a major driver of a lower than ever level of hope. Therefore, inequality is a recent factor, but was not the long-run driver of the decline in hope.

Jo Ritzen

Klaus F. Zimmermann