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
Generalized Social Marginal Welfare Weights for Optimal Tax Theory Emmanuel Saez, Stefanie Stantcheva

Generalized Social Marginal Welfare Weights for Optimal Tax Theory

Author: Emmanuel Saez, Stefanie Stantcheva
Publisher: American Economic Review
Date: 01/2016

This paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using "generalized social marginal welfare weights." Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social welfare weights with those generalized weights. Weights directly capture society's concerns for fairness without being necessarily tied to individual utilities. Suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice, as well as unify in an operational way the most prominent alternatives to utilitarianism such as Libertarianism, equality of opportunity, or poverty alleviation.

Inequality of Income and Consumption in the U.S.: Measuring the Trends in Inequality from 1984 to 2011 for the Same Individuals Jonathan Fisher, David S. Johnson, Timothy M. Smeeding

Inequality of Income and Consumption in the U.S.: Measuring the Trends in Inequality from 1984 to 2011 for the Same Individuals

Author: Jonathan Fisher, David S. Johnson, Timothy M. Smeeding
Publisher: Review of Income and Wealth
Date: 12/2015

This paper examines the distribution of income and consumption in the U.S. using one dataset that obtains measures of both income and consumption from the same set of individuals. We develop a set of inequality measures that show the increase in inequality during the past 27 years using the 1984–2011 Consumer Expenditure Survey. We find that the trends in income and consumption inequality are similar between 1984 and 2006, and diverge during and after the Great Recession. For the entire 27-year period we find that consumption inequality increases almost as much as does income inequality.

Intergenerational Mobility and Gender in Mexico Florencia Torche

Intergenerational Mobility and Gender in Mexico

Author: Florencia Torche
Publisher: Social Forces
Date: 12/2015

This article studies intergenerational socioeconomic mobility in Mexico comparing men and women. In contrast to most sociological work that uses individual-level measures to proxy family socioeconomic status, we use a direct measure of family living standards for both generations, based on an index of economic well-being. Strong intergenerational persistence is found in Mexico compared to other countries. Persistence is stronger for men than women, particularly among advantaged families. The role of education in the mobility process is examined. Findings indicate that “excess immobility” of men is not mediated by education. Wider gender differences among married/cohabiting than single respondents suggests parents are more likely to transfer socioeconomic resources to their married sons than married daughters. We argue for the advantages of measuring socioeconomic status directly at the household level, and of evaluating gender differences to gain insight about mobility mechanisms.

Intergenerational Mobility and Equality of Opportunity Florencia Torche

Intergenerational Mobility and Equality of Opportunity

Author: Florencia Torche
Publisher: European Journal of Sociology
Date: 12/2015

Intergenerational mobility—the association between parents’ and adult children’s economic wellbeing—is an important sociological concept because it provides information about inequality of opportunity in society, and it has gained relevance in the recent past due to the increase economic inequality in most of the affluent world. This article provides an overview of the different measures of mobility used by sociologists and economists, as well as main empirical findings about mobility. I then move to topics that push mobility analysis beyond its bivariate focus: The association between intergenerational mobility and economic inequality, the mechanisms for mobility, and the validity of mobility as a measure of inequality of opportunity. I suggest that the association between mobility and inequality is likely spurious, driven by varying institutional arrangements across countries, and that mobility analysis is most useful when focused on describing the bivariate intergenerational association across countries and over time.

Severe Deprivation in America: An Introduction Matthew Desmond

Severe Deprivation in America: An Introduction

Author: Matthew Desmond
Publisher: The Russell Sage Foundation Journal of the Social Sciences
Date: 11/2015

Poverty researchers from across the social sciences have the opportunity to reach collectively toward a new paradigm—not just a new way of thinking but a whole different approach to the study of vulnerability, violence, and marginality, one that carries methodological, policy-relevant, and normative implications. Most research is rooted in theories now a few decades old. These theories have stood the test of time because they are incisive, sweeping, and validated. But they also were developed before the United States began incarcerating more of its citizens than any other nation; before urban rents soared and poor families began dedicating the majority of their income to housing; before welfare reform caused caseloads to plummet; and before the crack epidemic tore apart poor minority communities. In recent years, the very nature of poverty in America has changed, especially at the very bottom. A new poverty agenda is needed for a world that is itself quite new.

income and wealth - CPI Affiliates

Peter T. Gottschalk's picture Peter T. Gottschalk Research Professor of Economics; Research Fellow, IZA
Boston College
Jonathan Kelley's picture Jonathan Kelley Director at International Survey Center; Adjunct Professor, Department of Sociology, University of Nevada, Reno
University of Nevada
Yossi Shavit Weinberg Professor of Sociology
Tel Aviv University
Petr Mateju's picture Petr Mateju Professor
Institute of Sociology of the Academy of Sciences of the Czech Republic
Julie E. Brines's picture Julie E. Brines Associate Professor
University of Washington

Pages

Income And Wealth - Other Research

Title Author Media
Wealth Levels, Wealth Inequality, and the Great Recession Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni

Wealth Levels, Wealth Inequality, and the Great Recession

Author: Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni
Publisher: Russell Sage Foundation
Date: 05/2014

This research brief assesses two questions about the extent to which the Great Recession altered the level and distribution of wealth through 2013--the most recent year of data available on wealth held by American families. 1. By how much did wealth levels decline during the Great Recession, and by how much did they recover through 2013? 2. Did wealth inequality increase, decrease, or remain steady during the Great Recession?

Overwork and the Slow Convergence in the Gender Gap in Wages Youngjoo Cha, Kim A. Weeden

Overwork and the Slow Convergence in the Gender Gap in Wages

Author: Youngjoo Cha, Kim A. Weeden
Publisher: American Sociological Review
Date: 04/2014

Despite rapid changes in women’s educational attainment and continuous labor force experience, convergence in the gender gap in wages slowed in the 1990s and stalled in the 2000s. Using CPS data from 1979 to 2009, we show that convergence in the gender gap in hourly pay over these three decades was attenuated by the increasing prevalence of “overwork” (defined as working 50 or more hours per week) and the rising hourly wage returns to overwork. Because a greater proportion of men engage in overwork, these changes raised men’s wages relative to women’s and exacerbated the gender wage gap by an estimated 10 percent of the total wage gap. This overwork effect was sufficiently large to offset the wage-equalizing effects of the narrowing gender gap in educational attainment and other forms of human capital. The overwork effect on trends in the gender gap in wages was most pronounced in professional and managerial occupations, where long work hours are especially common and the norm of overwork is deeply embedded in organizational practices and occupational cultures. These results illustrate how new ways of organizing work can perpetuate old forms of gender inequality.

The Impact of Earnings Disregards on the Behavior of Low-Income Families Jordan D. Matsudaira, Rebecca M. Blank

The Impact of Earnings Disregards on the Behavior of Low-Income Families

Author: Jordan D. Matsudaira, Rebecca M. Blank
Publisher: Journal of Policy Analysis and Management
Date: 01/2014

This paper investigates the impact of changes in earnings disregards for welfare assistance received by single mothers following welfare reform in 1996. Some states adopted much higher earnings disregards (women could work full-time and still receive substantial welfare benefits), while other states did not. We explore the effect of these changes on women's labor supply and income using several data sources and multiple estimation strategies. Our results indicate these changes had little effect on labor supply or income. We show this is because surprisingly few women used the earnings disregards. We discuss several explanations for why this might occur.

Class Rules: Exposing Inequality in American High Schools Peter W. Cookson, Jr.

Class Rules: Exposing Inequality in American High Schools

Author: Peter W. Cookson, Jr.
Publisher: Teachers College Press: Multicultural Education Series
Date: 08/2013

Class Rules challenges the popular myth that high schools are the “Great Equalizers.” In his groundbreaking study, Cookson demonstrates that adolescents undergo different class rites of passage depending on the social-class composition of the high school they attend. Drawing on stories of schools and individual students, the author shows that where a student goes to high school is a major influence on his or her social class trajectory. Class Rules is a penetrating, original examination of the role education plays in blocking upward mobility for many children. It offers a compelling vision of an equitable system of schools based on the full democratic rights of students.

Consumption and Income Inequality and the Great Recession Bruce D. Meyer , James X. Sullivan

Consumption and Income Inequality and the Great Recession

Author: Bruce D. Meyer , James X. Sullivan
Publisher: American Economic Review
Date: 05/2013

We examine changes in consumption and income inequality between 2000 and 2011. During the most recent recession, unemployment rose and asset values declined sharply. We investigate how the recession affected inequality while addressing concerns about underreporting in consumption data. Income inequality rose throughout the period from 2000 to 2011. The 90/10 ratio was 19 percent higher at the end of this period than at the beginning. In contrast, consumption inequality rose during the first half of this period but then fell after 2005. By 2011, the 90/10 ratio for consumption was slightly lower than it was in 2000.

Income And Wealth - Multimedia

Sorry, but no media items exist for this research group.