Income and Wealth Inequality
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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.
Featured Examples
Income And Wealth - CPI Research
| Title | Author | Media | |
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| State of the Union 2017: Wealth | Thomas Shapiro |
State of the Union 2017: WealthAuthor: Thomas ShapiroPublisher: Stanford Center on Poverty and Inequality Date: 06/2017 Why should we care about wealth? It serves an insurance function by protecting against economic shocks, health and personal crises, and mishaps. It brings access to quality health care, educational opportunities, better-resourced communities, and other services. It shapes family economic mobility. It provides retirement security and a springboard for future generations’ investments in human capital and resources. And finally, social and political influence, as well as personal identity, are attached to wealth. It thus matters whether opportunities to amass wealth are equally available. The simple result that will be discussed here: Access to building wealth is vastly unequal. |
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| State of the Union 2017: Earnings | Colin Peterson, C. Matthew Snipp, Sin Yi Cheung |
State of the Union 2017: EarningsAuthor: Colin Peterson, C. Matthew Snipp, Sin Yi CheungPublisher: Stanford Center on Poverty and Inequality Date: 06/2017 Between 1970 and 2010, the earnings gap between whites and other groups has narrowed, but most of that decline was secured in the immediate aftermath of the Civil Rights Movement. Except in the case of Asians, more recent trends are less favorable, with the post-1980 earnings gap either growing larger (e.g., Hispanics) or remaining roughly stable in size (e.g., black men). |
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| The Fading American Dream: Trends in Absolute Income Mobility Since 1940 | Raj Chetty, David Grusky, Maximilian Hell, Nathaniel Hendren, Robert Manduca, Jimmy Narang |
The Fading American Dream: Trends in Absolute Income Mobility Since 1940Author: Raj Chetty, David Grusky, Maximilian Hell, Nathaniel Hendren, Robert Manduca, Jimmy NarangPublisher: Date: 12/2016 We estimate rates of “absolute income mobility” – the fraction of children who earn more than their parents – by combining historical data from Census and CPS cross-sections with panel data for recent birth cohorts from de-identified tax records. Our approach overcomes the key data limitation that has hampered research on trends in intergenerational mobility: the lack of large panel datasets linking parents and children. We find that rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s. The result that absolute mobility has fallen sharply over the past half century is robust to the choice of price deflator, the definition of income, and accounting for taxes and transfers. In counterfactual simulations, we find that increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s. In contrast, changing the distribution of growth across income groups to the more equal distribution experienced by the 1940 birth cohort would reverse more than 70% of the decline in mobility. These results imply that reviving the “American Dream” of high rates of absolute mobility would require economic growth that is spread more broadly across the income distribution. |
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| Inequality and Mobility Using Income, Consumption, and Wealth for the Same Individuals | Jonathan Fisher, David Johnson, Jonathan P. Latner, Timothy Smeeding, Jeffrey Thompson |
Inequality and Mobility Using Income, Consumption, and Wealth for the Same IndividualsAuthor: Jonathan Fisher, David Johnson, Jonathan P. Latner, Timothy Smeeding, Jeffrey ThompsonPublisher: RSF Date: 11/2016 Recent studies of economic inequality almost always separately examine income inequality, consumption inequality, and wealth inequality, and hence, these studies miss the important synergy between the three measures explicit in the life-cycle budget constraint. Using the Panel Study of Income Dynamics (PSID), we study inequality in three dimensions, focusing on the conjoint distributions of income, consumption, and wealth for the same individuals. We find that the trends in inequality in income, consumption, and wealth similarly increase between 1999 and 2013. We examine the pairwise distributions of our measures using the average propensity to consume and the wealth-income ratios. Using the longitudinal nature of the PSID, we follow people over this period and find mobility is similar using income, consumption, and wealth. We conclude that while all three types of inequality are rising, wealth increasingly acts as a buffer to cushion income changes, which could reduce mobility—both intra- and inter-generational mobility. |
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| Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data | Cristobal Young, Charles Varner, Ithai Z. Lurie, Richard Prisinzano |
Millionaire Migration and Taxation of the Elite: Evidence from Administrative DataAuthor: Cristobal Young, Charles Varner, Ithai Z. Lurie, Richard PrisinzanoPublisher: American Sociological Review Date: 06/2016 A growing number of U.S. states have adopted “millionaire taxes” on top income-earners. This increases the progressivity of state tax systems, but it raises concerns about tax flight: elites migrating from high-tax to low-tax states, draining state revenues, and undermining redistributive social policies. Are top income-earners “transitory millionaires” searching for lower-tax places to live? Or are they “embedded elites” who are reluctant to migrate away from places where they have been highly successful? This question is central to understanding the social consequences of progressive taxation. We draw on administrative tax returns for all million-dollar income-earners in the United States over 13 years, tracking the states from which millionaires file their taxes. Our dataset contains 45 million tax records and provides census-scale panel data on top income-earners. We advance two core analyses: (1) state-to-state migration of millionaires over the long-term, and (2) a sharply-focused discontinuity analysis of millionaire population along state borders. We find that millionaire tax flight is occurring, but only at the margins of statistical and socioeconomic significance. |
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income and wealth - CPI Affiliates
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Henryk Domanski |
Professor, Director, Institute of Philosophy and Sociology |
Polish Academy of Sciences |
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Robin Samuel |
Associate Professor of Sociology |
University of Luxembourg |
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Dennis Gilbert |
Professor of Sociology Emeritus; Lecturer in Sociology |
Hamilton College |
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Nan Dirk De Graaf |
Professor and Official Fellow, Department of Sociology, Nuffield College |
University of Oxford |
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Hiroshi Ishida |
Professor of Sociology, Institute of Social Sciences |
University of Tokyo |
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Income And Wealth - Other Research
| Title | Author | Media | |
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| Reducing Income Inequality in Educational Attainment: Experimental Evidence on the Impact of Financial Aid on College Completion | Sara Goldrick-Rab, Robert Kelchen, Douglas N. Harris, James Benson |
Reducing Income Inequality in Educational Attainment: Experimental Evidence on the Impact of Financial Aid on College CompletionAuthor: Sara Goldrick-Rab, Robert Kelchen, Douglas N. Harris, James BensonPublisher: American Journal of Sociology Date: 05/2016 Income inequality in educational attainment is a long-standing concern, and disparities in college completion have grown over time. Need-based financial aid is commonly used to promote equality in college outcomes, but its effectiveness has not been established, and some are calling it into question. A randomized experiment is used to estimate the impact of a private need-based grant program on college persistence and degree completion among students from low-income families attending 13 public universities across Wisconsin. Results indicate that offering students additional grant aid increases the odds of bachelor’s degree attainment over four years, helping to diminish income inequality in higher education. |
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| ‘Membership Has Its Privileges’: Status Incentives and Categorical Inequality in Education | Thurston Domina, Andrew M. Penner, Emily K. Penner |
‘Membership Has Its Privileges’: Status Incentives and Categorical Inequality in EducationAuthor: Thurston Domina, Andrew M. Penner, Emily K. PennerPublisher: Sociological Science Date: 05/2016 Prizes – formal systems that publicly allocate rewards for exemplary behavior – play an increasingly important role in a wide array of social settings, including education. In this paper, we evaluate a prize system designed to boost achievement at two high schools by assigning students color-coded ID cards based on a previously low stakes test. Average student achievement on this test increased in the ID card schools beyond what one would expect from contemporaneous changes in neighboring schools. However, regression discontinuity analyses indicate that the program created new inequalities between students who received low-status and high-status ID cards. These findings indicate that status-based incentives create categorical inequalities between prize winners and others even as they reorient behavior toward the goals they reward. |
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| Wealth Levels, Wealth Inequality, and the Great Recession | Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni |
Wealth Levels, Wealth Inequality, and the Great RecessionAuthor: Fabian T. Pfeffer, Sheldon Danziger, Robert F. SchoeniPublisher: 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? |
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| Less Than Equal: Racial Disparities in Wealth Accumulation | Signe-Mary McKernan, Caroline Ratcliffe, Eugene Steuerle, Sisi Zhang |
Less Than Equal: Racial Disparities in Wealth AccumulationAuthor: Signe-Mary McKernan, Caroline Ratcliffe, Eugene Steuerle, Sisi ZhangPublisher: Urban Institute Date: 04/2013 When it comes to economic gaps between whites and communities of color in the United States, income inequality tells part of the story. But let's not forget about wealth. Wealth isn't just money in the bank, it's insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class. In short, wealth translates into opportunity. |
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| Lost Generations? Wealth Among Young Americans | Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, Sisi Zhang |
Lost Generations? Wealth Among Young AmericansAuthor: Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, Sisi ZhangPublisher: Urban Institute Date: 03/2013 Despite the Great Recession and the fragile economic recovery, the wealth of Americans has grown significantly when a longer-term view is considered. Average household wealth approximately doubled from 1983 to 2010, and average incomes rose similarly. For many, the American dream of working hard, saving more, and becoming wealthier than one's parents holds true. |
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