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
Inequality and Market Failure Kim A. Weeden, David B. Grusky

Inequality and Market Failure

Author: Kim A. Weeden, David B. Grusky
Publisher: Sage Publications
Date: 03/2014

We argue that market failure is a major and growing source of income inequality in the United States and in liberal market economies (LMEs) more generally. This market failure takes the form of occupational, educational, managerial, and capital rents that are generated by institutional barriers that restrict the free flow of capital or labor. We suggest that these four forms of rent can partly account for (a) the extreme income inequality at the very top of the LME income distribution as well as (b) the extreme income inequality that is also observed beneath the highest percentiles of the income distribution. The sharp increase in these forms of rent, when coupled with rent destruction at the bottom of the labor market, may well explain much of the takeoff in LME inequality in the past four decades. We conclude by outlining the empirical research agenda and policy prescription implied by a rent-based account.

Theoretical Models of Inequality Transmission Across Multiple Generations Gary Solon

Theoretical Models of Inequality Transmission Across Multiple Generations

Author: Gary Solon
Publisher: Elsevier Ltd.
Date: 03/2014
Why Status Matters for Inequality Cecilia L. Ridgeway

Why Status Matters for Inequality

Author: Cecilia L. Ridgeway
Publisher:
Date: 02/2014

To understand the mechanisms behind social inequality, this address argues that we need to more thoroughly incorporate the effects of status—inequality based on differences in esteem and respect—alongside those based on resources and power. As a micro motive for behavior, status is as significant as money and power. At a macro level, status stabilizes resource and power inequality by transforming it into cultural status beliefs about group differences regarding who is “better” (esteemed and competent). But cultural status beliefs about which groups are “better” constitute group differences as independent dimensions of inequality that generate material advantages due to group membership itself. Acting through micro-level social relations in workplaces, schools, and elsewhere, status beliefs bias evaluations of competence and suitability for authority, bias associational preferences, and evoke resistance to status challenges from low-status group members. These effects accumulate to direct members of higher status groups toward positions of resources and power while holding back lower status group members. Through these processes, status writes group differences such as gender, race, and class-based life style into organizational structures of resources and power, creating durable inequality. Status is thus a central mechanism behind durable patterns of inequality based on social differences.

Social Capital and Inequality: The Significance of Social Connections Karen S. Cook

Social Capital and Inequality: The Significance of Social Connections

Author: Karen S. Cook
Publisher:
Date: 01/2014

The study of social connections and their consequences is central to social psychology and represents a growing field of inquiry in the social sciences more broadly. It is linked to the analysis of social networks and to what is called “social capital,” a term made popular by Robert Putnam. A major dimension of inequality in society is the extent of access to social capital, to connections that matter. Differential access to such resources is one of the most enduring features of social inequality and a key reason for its reproduction across time and space. Networks structure access and access to social capital is linked to variation in important life outcomes, revealing the significance of such factors for the study of inequality and its reproduction. Social capital has been linked to outcomes as diverse as health status, intellectual development, academic performance, employment opportunities, occupational attainment, entrepreneurial success or failure, and even juvenile delinquency, among other things. This chapter reviews some of the relevant theory and research on networks and inequality.

Why Status Matters for Inequality Cecilia L. Ridgeway

Why Status Matters for Inequality

Author: Cecilia L. Ridgeway
Publisher: Sage Publications
Date: 01/2014

To understand the mechanisms behind social inequality, this address argues that we need to more thoroughly incorporate the effects of status—inequality based on differences in esteem and respect—alongside those based on resources and power. As a micro motive for behavior, status is as significant as money and power. At a macro level, status stabilizes resource and power inequality by transforming it into cultural status beliefs about group differences regarding who is “better” (esteemed and competent). But cultural status beliefs about which groups are “better” constitute group differences as independent dimensions of inequality that generate material advantages due to group membership itself. Acting through micro- level social relations in workplaces, schools, and elsewhere, status beliefs bias evaluations of competence and suitability for authority, bias associational preferences, and evoke resistance to status challenges from low-status group members. These effects accumulate to direct members of higher status groups toward positions of resources and power while holding back lower status group members. Through these processes, status writes group differences such as gender, race, and class-based life style into organizational structures of resources and power, creating durable inequality. Status is thus a central mechanism behind durable patterns of inequality based on social differences. 

income and wealth - CPI Affiliates

Ira I. Katznelson's picture Ira I. Katznelson Ruggles Professor of Political Science and History
Columbia University
Toby L. Parcel's picture Toby L. Parcel Professor of Sociology
North Carolina State University
Nancy Tuma's picture Nancy Tuma Professor of Sociology, Emerita
Stanford University
Jan O. Jonsson's picture Jan O. Jonsson Official Fellow of Nuffield College, Oxford University
Oxford University
Trond Petersen's picture Trond Petersen Professor; Associate Dean of the Division of Social Sciences
University of California, Berkeley

Pages

Income And Wealth - Other Research

Title Author Media
Consumption and Income Poverty over the Business Cycle Bruce D. Meyer, James X. Sullivan

Consumption and Income Poverty over the Business Cycle

Author: Bruce D. Meyer, James X. Sullivan
Publisher: Research in Labor Economics
Date: 01/2011

We examine the relationship between the business cycle and poverty for the period from 1960 to 2008 using income data from the Current Population Survey and consumption data from the Consumer Expenditure Survey. This new evidence on the relationship between macroeconomic conditions and poverty is of particular interest given recent changes in anti-poverty policies that have placed greater emphasis on participation in the labor market and in-kind transfers. We look beyond official poverty, examining alternative income poverty and consumption poverty, which have conceptual and empirical advantages as measures of the well-being of the poor. We find that both income and consumption poverty are sensitive to macroeconomic conditions. A one percentage point increase in unemployment is associated with an increase in the after-tax income poverty rate of 0.9 to 1.1 percentage points in the long-run, and an increase in the consumption poverty rate of 0.3 to 1.2 percentage points in the long-run. The evidence on whether income is more responsive to the business cycle than consumption is mixed. Income poverty does appear to be more responsive using national level variation, but consumption poverty is often more responsive to unemployment when using regional variation. Low percentiles of both income and consumption are sensitive to macroeconomic conditions, and in most cases low percentiles of income appear to be more responsive than low percentiles of consumption.

Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937 Wojciech, Kopczuk, Emmanuel Saez and Jae Song

Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937

Author: Wojciech, Kopczuk, Emmanuel Saez and Jae Song
Publisher:
Date: 12/2010
The Race Between Education and Technology Goldin, Claudia, Lawrence F. Katz

The Race Between Education and Technology

Author: Goldin, Claudia, Lawrence F. Katz
Publisher: Harvard University Press
Date: 03/2010
Rousseau: A Free Community of Equals Joshua Cohen

Rousseau: A Free Community of Equals

Author: Joshua Cohen
Publisher: Oxford University Press
Date: 01/2010

In famously beautiful and laconic prose, Jean- Jacques Rousseau presents us a forceful picture of a democratic society, in which we live together as free and equal, and our politics focuses on the common good. In Rousseau: Free Community of Equals Joshua Cohen explains how the values of freedom, equality, and community all work together as parts of the democratic ideal expressed in Rousseau's conception of the ‘society of the general will'. The book also explains Rousseau's anti-Augustinian and anti-Hobbesian idea that we are naturally good, shows why Rousseau thinks it is reasonable for us to endorse that idea, and discusses how our natural goodness might make a free community of equals possible for us. Cohen examines in detail Rousseau's picture of the institutions of a democratic society: why he emphasized the importance of political participation, how he argued against extreme inequalities, and what led him to embrace a civil religion as necessary for the society of the general will. This book provides an analytical and critical appraisal of Rousseau's political thought that, while frank about its limits, also explains its enduring power.

Immigration and Inequality David Card

Immigration and Inequality

Author: David Card
Publisher: NBER
Date: 01/2009

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