"The Rise in Inequality" HEC Paris Conference by David Thesmar

16 June 2015

On June 9th in London, HEC UK Alumni had the opportunity to hear David Thesmar, professor of finance at HEC Paris, discuss: ‘The rise in inequality: where it comes from and what can be done about it’.

Thesmar in London The Rise in Inequality

Professor Thesmar questioned the views of economist Thomas Piketty, and what he labels the ‘Cambridge view’, defended since the mid-1990s by economists at Harvard and MIT. Thomas Piketty’s bestseller, Capital in the Twenty-First Century, underlined the rise in wealth inequality, in particular the rising share of economic growth that is captured by the wealthiest 1%, culminating at 95% of economic growth from 2009 to 2012 in the United States. Piketty shows that capital is much more unevenly distributed than income, hence can only worsen unless the wealthy are taxed.

Thesmar showed that Piketty’s theory has its blinds spots: It does not account for the fact that labor income too has become more unequally distributed, not just capital. Another unexplained fact is why low-paid jobs have attracted reducing income since the mid-1970s, and whether capital can really be expected to grow faster than economic growth.

The Cambridge view explains growing inequality by looking at technological change and the destruction of routine-based jobs, i.e. those that can be mechanized. In a post-industrial society where a vast number of workers are replaced by robots and machines, services develop, paving the way for a flurry of low-income, personal services jobs and high-income, ‘abstract’ jobs. The Cambridge view is that de-industrialization is here to stay, so workers should be trained to do non-routine tasks and adapt to the service industry. In this scenario, the government, not the firm, can enforce redistribution and promote upward mobility, i.e. the ability for a generation to be better off than their parents.

David Thesmar proposed economic policy to tackle growing inequality in our societies, stressing the role of education, in particular access to higher education, and highlighting the problems posed by a high minimum wage in Europe.


David Thesmar holds a Ph.D in Economics from Ecole des Hautes Etudes en Sciences Sociales (EHESS). Before joining HEC Paris, he was eurozone forecast manager for the French Ministry of Finance and researcher at INSEE, the French statistical office. He has taught corporate finance at ENSAE, Ecole Normale, Ecole Polytechnique and the London School of Economics.

His research interests include behavioral finance, financial intermediation, and the real effects of finance, corporate governance and firm organization.

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