Income and Wealth Inequality

  • Nicholas Bloom
  • Raj Chetty
  • Emmanuel Saez

Leaders: Nicholas Bloom, Raj Chetty, Emmanuel Saez

The CPI is home to some of the country’s most influential analyses of the income and wealth distribution. The purpose of the Income and Wealth RG is to monitor the ongoing takeoff in income inequality, to better understand its sources, and to analyze its implications for labor market performance, educational attainment, mobility, and more. The following is a sampling of the CPI’s research projects within this area.

Trends in income and wealth inequality: What are the key trends in U.S. income and wealth inequality? The U.S. increasingly looks to Emmanuel Saez and his research team for the latest data on U.S. economic inequality.

Distributional National Accounts: In an ambitious infrastructural project, Emmanuel Saez and his team are building a “Distributional National Accounts” based on tax returns, a data set that will eliminate the current gap between (a) national accounts data based on economic aggregates and (b) inequality analysis that uses micro-level tax data to examine the distribution of income but is not consistent with national aggregates. This new data set will in turn make it possible to evaluate the extent to which economic growth, which has long been represented as a preferred poverty-reduction approach, is indeed delivering on that objective.

The rise of between-firm inequality: How much of the rise in earnings inequality can be attributed to increasing between-firm dispersion in the average wages they pay? This question can be addressed by constructing a matched employer-employee data set for the United States using administrative records.

Rent and inequality: It is increasingly fashionable to argue that “rent” accounts for much of the takeoff in income inequality. The Current Population Survey can be used to assess whether this claim is on the mark. 

Income And Wealth - CPI Research

Title Author Media
Consumption Inequality and Family Labor Supply Richard Blundell , Luigi Pistaferri , Itay Saporta-Eksten

Consumption Inequality and Family Labor Supply

Author: Richard Blundell , Luigi Pistaferri , Itay Saporta-Eksten
Publisher: American Economic Review
Date: 02/2016

We examine the link between wage and consumption inequality using a life-cycle model incorporating consumption and family labor supply decisions. We derive analytical expressions for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, nonseparability, progressive taxation, and asset accumulation. The model is estimated using panel data for hours, earnings, assets, and consumption. We focus on family labor supply as an insurance mechanism and find strong evidence of smoothing of permanent wage shocks. Once family labor supply, assets, and taxes are properly accounted for there is little evidence of additional insurance.

Childhood Environment and Gender Gaps in Adulthood Raj Chetty, Nathaniel Hendren, Frina Lin, Jeremy Majerovitz, Benjamin Scuderi

Childhood Environment and Gender Gaps in Adulthood

Author: Raj Chetty, Nathaniel Hendren, Frina Lin, Jeremy Majerovitz, Benjamin Scuderi
Publisher: NBER
Date: 02/2016

We show that differences in childhood environments play an important role in shaping gender gaps in adulthood by documenting three facts using population tax records for children born in the 1980s. First, gender gaps in employment rates, earnings, and college attendance vary substantially across the parental income distribution. Notably, the traditional gender gap in employment rates is reversed for children growing up in poor families: boys in families in the bottom quintile of the income distributionare less likely to work than girls. Second, these gender gaps vary substantially across counties and commuting zones in which children grow up. The degree of variation in outcomes across places is largest for boys growing up in poor, single-parent families. Third, the spatial variation in gender gaps is highly correlated with proxies for neighborhood disadvantage. Low-income boys who grow up in high-poverty, high-minority areas work significantly less than girls. These areas also have higher rates of crime, suggesting that boys growing up in concentrated poverty substitute from formal employment to crime. Together, these findings demonstrate that gender gaps in adulthood have roots in childhood, perhaps because childhood disadvantage is especially harmful for boys.

State of the Union 2016: Wealth Inequality Gabriel Zucman

State of the Union 2016: Wealth Inequality

Author: Gabriel Zucman
Publisher:
Date: 02/2016

Over the past four decades, only the very rich, the top 0.1 percent, have realized wealth increases in the U.S. In 2012, the top 0.1 percent included 160,000 households with total net assets of more than 20 million. At the same time, the middle class, those in the 50th-90th percentiles, have experienced a decline in their wealth share.

State of the Union 2016: Income Inequality Jonathan Fisher, Timothy Smeeding

State of the Union 2016: Income Inequality

Author: Jonathan Fisher, Timothy Smeeding
Publisher: Stanford Center on Poverty and Inequality
Date: 02/2016

When disposable-income inequality is measured across 20–35 years of survey data, the consistent result is that the U.S. has the highest level of disposable-income inequality among rich countries. Some countries have experienced periods of falling, as well as rising, inequality over the last three decades. The simple, but important, conclusion to draw is that rising income inequality is not inevitable. Policy and markets can both make a difference.

Living in a High Inequality Regime

Living in a High Inequality Regime

Author:
Publisher: Annals of the American Academy of Political and Social Science
Date: 01/2016

Income inequality in the United States is the highest it has been since the roaring 20s. The rich are getting richer. The middle class is descending from the middle. The poor are getting poorer. What accounts for the increase in wealth at the top? What dynamic forces have shaped this spectacular disparity? How are Americans adjusting to life in this brave new world? What effect does the social fallout of this inequality regime have on the fabric of American society?

The effects of rising inequality have proven difficult to tease out, but as the United States enters a moment in history in which key policy decisions about inequality, mobility, and poverty are being made, it is important for researchers to examine this trend to learn why there is so much inequality in the United States. In this volume of The ANNALS experts examine the “social fallout” from this income imbalance.  They shine a light on the winners and losers, focusing on occupational inequality, racial and gender inequality, as well as inequality in veteran groups. They explore accessibility and segregation to gauge how educational and crime/punishment trends are shaped by inequality. Finally, they examine how inequality impacts Americans’ views of themselves and others; the dynamics of class and culture; and the effects of socioeconomics on marriage, health, and death.

income and wealth - CPI Affiliates

Mark G. Kelman's picture Mark G. Kelman James C. Gaither Professor of Law; Vice Dean
Stanford University
Victor Fuchs's picture Victor Fuchs Henry J. Kaiser, Jr. Professor of Economics and of Health Research and Policy (Emeritus)
Stanford University
Patricia A. Roos's picture Patricia A. Roos Professor of Sociology
Rutgers University-New Brunswick
Joanne Martin's picture Joanne Martin Fred H. Merrill Professor of Organizational Behavior; Professor of Sociology (by courtesy)
Stanford University
Nathaniel Hendren's picture Nathaniel Hendren Assistant Professor of Economics
Harvard University

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Income And Wealth - Other Research

Title Author Media
New Perspectives on the Declining Significance of Race: A Rejoinder William Julius Wilson

New Perspectives on the Declining Significance of Race: A Rejoinder

Author: William Julius Wilson
Publisher: Ethnic and Racial Studies
Date: 04/2015

In sharp contrast to many earlier studies, the articles in this symposium encompass a careful discussion of the two major underlying themes of my book, The Declining Significance of Race: (1) the effect of fundamental economic and political shifts on the changing relative importance of race and class in black occupational mobility and job placement; and (2) the swing in the concentration of racial conflict from the economic sector to the sociopolitical order. In my rejoinder I reflect on their arguments, including those that relate these themes to more recent developments in American race and ethnic relations featuring other groups, including whites and Latinos.

Effect of Neighborhood Stigma on Economic Transactions Max Besbris, Jacob William Faber, Peter Rich, Patrick Sharkey

Effect of Neighborhood Stigma on Economic Transactions

Author: Max Besbris, Jacob William Faber, Peter Rich, Patrick Sharkey
Publisher: Proceedings of the National Academy of Sciences of the United States of America
Date: 04/2015

The hypothesis of neighborhood stigma predicts that individuals who reside in areas known for high crime, poverty, disorder, and/or racial isolation embody the negative characteristics attributed to their communities and experience suspicion and mistrust in their interactions with strangers. This article provides an experimental test of whether neighborhood stigma affects individuals in one domain of social life: economic transactions. To evaluate the neighborhood stigma hypothesis, this study adopts an audit design in a locally organized, online classified market, using advertisements for used iPhones and randomly manipulating the neighborhood of the seller. The primary outcome under study is the number of responses generated by sellers from disadvantaged relative to advantaged neighborhoods. Advertisements from disadvantaged neighborhoods received significantly fewer responses than advertisements from advantaged neighborhoods. Results provide robust evidence that individuals from disadvantaged neighborhoods bear a stigma that influences their prospects in economic exchanges. The stigma is greater for advertisements originating from disadvantaged neighborhoods where the majority of residents are black. This evidence reveals that residence in a disadvantaged neighborhood not only affects individuals through mechanisms involving economic resources, institutional quality, and social networks but also affects residents through the perceptions of others.

Age at Menarche: 50-year Socioeconomic Trends Among US-born Black and White Women Krieger N, Kiang MV, Kosheleva A, Waterman PD, Chen JT, Beckfield J

Age at Menarche: 50-year Socioeconomic Trends Among US-born Black and White Women

Author: Krieger N, Kiang MV, Kosheleva A, Waterman PD, Chen JT, Beckfield J
Publisher: American Journal of Public Health
Date: 02/2015

OBJECTIVES:

We investigated 50-year US trends in age at menarche by socioeconomic position (SEP) and race/ethnicity because data are scant and contradictory.

METHODS:

We analyzed data by income and education for US-born non-Hispanic Black and White women aged 25 to 74 years in the National Health Examination Survey (NHES) I (1959-1962), National Health Examination and Nutrition Surveys (NHANES) I-III (1971-1994), and NHANES 1999-2008.

RESULTS:

In NHES I, average age at menarche among White women in the 20th (lowest) versus 80th (highest) income percentiles was 0.26 years higher (95% confidence interval [CI] = -0.09, 0.61), but by NHANES 2005-2008 it had reversed and was -0.33 years lower (95% CI = -0.54, -0.11); no socioeconomic gradients occurred among Black women. The proportion with onset at younger than 11 years increased only among women with low SEP, among Blacks and Whites (P for trend < .05), and high rates of change occurred solely among Black women (all SEP strata) and low-income White women who underwent menarche before 1960.

CONCLUSIONS:

Trends in US age at menarche vary by SEP and race/ethnicity in ways that pose challenges to several leading clinical, public health, and social explanations for early age at menarche and that underscore why analyses must jointly include data on race/ethnicity and socioeconomic position. Future research is needed to explain these trends.

The Counter-Cyclical Character of the Elite Shamus Khan

The Counter-Cyclical Character of the Elite

Author: Shamus Khan
Publisher: Research in the Sociology of Organizations
Date: 02/2015

This paper begins by outlining the basic attitudinal differences between the elite and the rest of society. Understanding these divergent views does not require resorting to arguments that reply upon error, ignorance, manipulation, or differences in individual character. Instead, both elites and others are correct in their understanding of these processes because they overgeneralize from their own experience. The major proposition of this paper is that if we compare the economic conditions of the average American and to that of the elite, we find that they are, in important ways, the inverse of one another. During times when Americans as a whole were experiencing economic advancement and mobility, elites were comparatively stagnant. And today, as most Americans are locked in place, elites observe tremendous mobility. The counter-cyclical character of the elite has important implications for our understanding of elite culture, and elite response to inequality and redistribution.

A Comparison of Official Poverty Estimates in the Redesigned Current Population Survey Annual Social and Economic Supplement Joshua Mitchell, Trudi Renwick

A Comparison of Official Poverty Estimates in the Redesigned Current Population Survey Annual Social and Economic Supplement

Author: Joshua Mitchell, Trudi Renwick
Publisher: U.S. Census Bureau
Date: 01/2015

This paper presents a descriptive analysis of the poverty estimates from the 2014 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) redesigned and traditional survey questionnaires. The 2014 CPS ASEC utilized a probability split panel design to test a new redesigned set of income questions. The income questions were redesigned with the goals of improving income reporting, increasing response rates, reducing reporting errors by taking better advantage of an automated questionnaire environment, and updating questions on retirement income and the income generated from retirement accounts and all other assets. Our main finding is that, among the demographic subgroups examined, most differences between the poverty estimates for the samples assigned to the traditional and redesigned survey instruments were not statistically significant but child (people under age 18) and elderly (people age 65 and older) poverty were higher in the sample assigned to the redesigned questionnaire despite the higher aggregate, mean, and median income collected in the sample with the redesigned questions compared to the sample with the traditional questions.