Exploitation, skills, and inequality

Abstract

This paper uses a computational framework to analyse the equilibrium dynamics of exploitation and inequality in accumulation economies with heterogeneous labour. A novel index is presented which measures the intensity of exploitation at the individual level and the dynamics of the distribution of exploitation intensity is analysed. Various taxation schemes are analysed which may reduce exploitation or inequalities in income and wealth. It is shown that relatively small taxation rates may have significant cumulative effects on wealth and income inequalities. Further, taxation schemes that eliminate exploitation also reduce disparities in income and wealth but in the presence of heterogeneous skills, do not necessarily eliminate them. The inegalitarian effects of different abilities need to be tackled with a progressive education policy that compensates for unfavourable circumstances. JEL: B51; C63, D31.

Computational methods and classical‐Marxian economics

“…This structure of (σ ν ) ν∈N captures the classical-Marxian view that very wealthy "capitalists" derive nearly all of their income from capital ownership rather than labour performed -a view consistent with Piketty's (2014) findings. It also produces an initial distribution of income that is close to empirical observations for the U.S. Cogliano et al (2016Cogliano et al ( , 2019 consider initially capital constrained economies where exploitation exists as a result of the unequal ownership of wealth. The simulations specify initial conditions for (N 0 , A 0 , L 0 , b 0 ).…”

“…The effect of alternative societal structures on exploitative relations, the interaction of inequality in exploitation intensity, wealth, and income, or the effect of different policies on G ε t , G W t , G I t are not easily studied with standard analytical tools. Thus, Cogliano et al (2016Cogliano et al ( , 2019 adopt a computational approach. 31 Cogliano et al (201631 Cogliano et al ( , 2019 calibrate their models to empirical observations for the U.S.…”

“…31 Cogliano et al (201631 Cogliano et al ( , 2019 calibrate their models to empirical observations for the U.S. The initial distribution of wealth maps closely that of the U.S., and in the general case with heterogeneous labour (Cogliano et al 2019), skill factors σ ν are increasing in ω ν 0 over the first 80% of agents and decreasing thereafter. This structure of (σ ν ) ν∈N captures the classical-Marxian view that very wealthy "capitalists" derive nearly all of their income from capital ownership rather than labour performed -a view consistent with Piketty's (2014) findings.…”

“…Second, and perhaps more important, a socialist economic policy does not consist of a single instrument -wealth or income taxation, -and aims at a more egalitarian distribution of all assets, including (acquired) skills. Cogliano et al (2019) run a simulation of the model with socialist wealth taxation in which a fraction of the tax proceeds are used to fund education, which increases skills. The education system is aimed at mitigating inequalities in skills by providing more educational resources to low-skilled agents.…”

“… As Roemer (2020, p.46) himself has noted, one should also be mindful "of the importance of the cooperative ethos to socialism, and the possible dynamic interaction between that ethos and property relations".27 For a discussion seeYoshihara (2010Yoshihara ( , 2017 andMohun and Veneziani (2017).28 In principle, agents can also operate her own capital. However,Cogliano et al (2016Cogliano et al ( , 2019 prove that self-employment can be ignored in equilibrium without loss of generaility.…”