Making the rounds

This is a chart from Dani Rodrik's blog that was making the econ blog rounds this week. I think the point that it's trying to make is pretty straightforward, but whether or not you believe it is a different question.In case you can't read it, the x-axis shows the US population, segmented by income percentiles. The y-axis shows the average annual growth rates in real income for the people in those income levels. The line on the top shows the relation under Democratic presidents, the line on the bottom shows the relation under Republic presidents. The data range is from 1948 to 2003.

The clearly depicted story is that under Democratic presidents, not only has real income growth been significantly more equitable across income segments (as might be expected), but it has been higher overall, even for those in the top income brackets.

There are a host of factors that may be at work here. I will let Rodrik explain which factors are relevant:

Bartels [Princeton professor that produced the chart] shows in his book that this difference is not a statistical artifact or a fluke. It is not the result of Democrats coming to power during better economic times, or of Republicans reining in the unsustainable excesses of Democratic administrations they replace. (It turns out that the same pattern prevails even when a Republican president is succeeded by another Republican.) These numbers are real and they are the outcome of partisan differences in policy. So if you are one of those who have bought the story that income distribution is the result of pure market forces and technological changes, with politics playing no role--think again.
There's another chart out there somewhere that shows that strangely enough, avg. real income growth is higher under Republicans during election years. I'll see if I can find it later.

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