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
The Association Between Income and Life Expectancy in the United States, 2001-2014 Raj Chetty, Michael Stepner, Sarah Abraham, Shelby Lin, Benjamin Scuderi, Nicholas Turner, Augustin Bergeron, David Cutler

The Association Between Income and Life Expectancy in the United States, 2001-2014

Author: Raj Chetty, Michael Stepner, Sarah Abraham, Shelby Lin, Benjamin Scuderi, Nicholas Turner, Augustin Bergeron, David Cutler
Publisher: Journal of the American Medical Association
Date: 04/2016

In the United States between 2001 and 2014, higher income was associated with greater longevity, and differences in life expectancy across income groups increased over time. However, the association between life expectancy and income varied substantially across areas; differences in longevity across income groups decreased in some areas and increased in others. The differences in life expectancy were correlated with health behaviors and local area characteristics.

The Continuing Increase in Income Segregation, 2007-2012 Sean F. Reardon, Kendra Bischoff

The Continuing Increase in Income Segregation, 2007-2012

Author: Sean F. Reardon, Kendra Bischoff
Publisher: Stanford Center for Education Policy Analysis
Date: 03/2016

Income segregation in the United States grew substantially from 1970 to 2007 (Bischoff & Reardon, 2014; Jargowsky, 1996; Reardon & Bischoff, 2011a, 2011b; Watson, 2009). Income segregation grew sharply in the 1980s, changed little in the 1990s, and then grew again in the early 2000s. A primary cause of this growth in segregation has been the rise in income inequality over the last four decades (Bischoff & Reardon, 2014; Reardon & Bischoff, 2011b; Watson, 2009). Income inequality in the U.S. continued to rise in the 2000s. Although income inequality declined modestly from 2007 to 2009 during the Great Recession, it quickly rebounded, and is now higher than it was in 2007. In 2014, the top 10% of earners collectively accrued 50% of all income in the U.S. (Piketty & Saez, 2015). Has the post-recession increase in income inequality led to a continued rise in income segregation? In this report, we use the most recent data from the American Community Survey to investigate whether income segregation increased from 2007 to 2012. These data indicate that income segregation rose modestly from 2007 to 2012. This continues the trend of rising income segregation that began in the 1980s. We show that the growth in income segregation varies among metropolitan areas, and that segregation increased rapidly in places that experienced large increases in income inequality. This suggests that rising income inequality continues to be a key factor leading to increasing residential segregation by income.

Shared Prosperity in America's Communities

Shared Prosperity in America's Communities

Publisher: University of Pennsylvania Press
Date: 03/2016

While the nation's GDP has doubled in the last thirty years, significant increases in family income have been restricted to a small subset of the American population. This disjunct between national economic growth and stagnating incomes in all but the very top tier of the population corresponds with increasing economic inequality and a lack of social and economic mobility. As a consequence, neighborhoods and metropolitan areas have become more polarized. Stark geographic differences in levels of poverty, income, health outcomes, job opportunities, lifetime earning potential, and educational attainment highlight the degree to which place matters in terms of social and economic opportunity. Shared Prosperity in America's Communities examines this place-based disparity of opportunity and suggests what can be done to ensure that the benefits of economic growth are widely shared. Contributors' essays explore social and economic mobility throughout the country to illuminate the changing geography of inequality, offer a portfolio of strategies to address the challenges of place-based inequality, and show how communities across the nation are implementing change and building a future of shared prosperity.

The Determinants and Welfare Implications of US Workers’ Diverging Location Choices by Skill: 1980-2000 Rebecca Diamond

The Determinants and Welfare Implications of US Workers’ Diverging Location Choices by Skill: 1980-2000

Author: Rebecca Diamond
Publisher: American Economic Review
Date: 03/2016

From 1980 to 2000, the rise in the US college/high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage, high rent cities. This paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting. While local labor demand changes fundamentally caused the increased skill sorting, it was further fueled by endogenous increases in amenities within higher skill cities. Changes in cities' wages, rents, and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone.

Residential Segregation is the Linchpin of Racial Stratification Douglas S. Massey

Residential Segregation is the Linchpin of Racial Stratification

Author: Douglas S. Massey
Publisher: City and Community
Date: 03/2016

"White racial attitudes toward black Americans shifted during the Civil Rights Era ... with important consequences for patterns of racial segregation. During the 1980s, principled support for segregation all but disappeared; but despite this retreat from segregationist ideology, whites nonetheless continued to harbor strong anti-black sentiments rooted in negative stereotypes about the low intelligence, lack of motivation, propensity toward criminality, and predatory sexuality of African Americans (Bobo et al. 2012). Even though whites had come to reject segregation in principle, they continued to feel uncomfortable in the presence of many African Americans in practice; and they grew progressively more uncomfortable as black numbers in the social setting rose (Charles 2003)."

income and wealth - CPI Affiliates

David Neumark's picture David Neumark Founding Director, Economic Self-Sufficiency Policy Research Institute (ESSPRI); Chancellor’s Professor of Economics; Research Associate, NBER; Research Fellow, IZA; Director, Center for Economics & Public Policy
University of California, Irvine
Tak Wing Chan's picture Tak Wing Chan Professor of Quantitative Social Science
UCL Institute of Education
Leslie McCall's picture Leslie McCall Presidential Professor of Sociology and Political Science; Associate Director, Stone Center on Socio-Economic Inequality; LIS Senior Scholar
City University of New York
Donald J. Treiman's picture Donald J. Treiman Distinguished Professor of Sociology Emeritus; Research Professor, UCLA Faculty Associate, California Center for Population Research
University of California , Los Angeles
Tali Kristal's picture Tali Kristal Senior Lecturer, Department of Sociology and Anthropology
University of Haifa


Income And Wealth - Other Research

Title Author Media
Social Mobility in a High-Inequality Regime Pablo A. Mitnik, Erin Cumberworth, David B. Grusky

Social Mobility in a High-Inequality Regime

Author: Pablo A. Mitnik, Erin Cumberworth, David B. Grusky
Publisher: Annals of the American Academy of Political and Social Science
Date: 01/2016

Are opportunities to get ahead growing more unequal? Using data from the General Social Survey (GSS), it is possible to provide evidence on this question, evidence that is suggestive but must be carefully interpreted because the samples are relatively small. The GSS data reveal an increase in class reproduction among young and middle-age adults that is driven by the growing advantage of the professional-managerial class relative to all other classes. This trend is largely consistent with our new “top-income hypothesis” that posits that rising income inequality registers its effects on social mobility almost exclusively in the divide between the professional-managerial class and all other classes. We develop a two-factor model in which the foregoing effects of the inequality takeoff are set against the countervailing effects of the expansion of mass education. As the model implies, the trend in intergenerational association takes on a convex shape in the younger age groups, with the change appearing to accelerate in the most recent decade. These results suggest that the takeoff in income inequality may account in part for the decline in mobility.

Compounded Deprivation in the Transition to Adulthood: The Intersection of Racial and Economic Inequality Among Chicagoans, 1995–2013 Kristin L. Perkins, Robert J. Sampson

Compounded Deprivation in the Transition to Adulthood: The Intersection of Racial and Economic Inequality Among Chicagoans, 1995–2013

Author: Kristin L. Perkins, Robert J. Sampson
Publisher: RSF: The Russell Sage Foundation Journal of the Social Sciences
Date: 11/2015

This paper investigates acute, compounded, and persistent deprivation in a representative sample of Chicago adolescents transitioning to young adulthood. Our investigation, based on four waves of longitudinal data from 1995 to 2013, is motivated by three goals. First, we document the prevalence of individual and neighborhood poverty over time, especially among whites, blacks, and Latinos. Second, we explore compounded deprivation, describing the extent to which study participants are simultaneously exposed to individual and contextual forms of deprivation—including material deprivation (such as poverty) and social-organizational deprivation (for example, low collective efficacy)—for multiple phases of the life course from adolescence up to age thirty-two. Third, we isolate the characteristics that predict transitions out of compounded and persistent poverty. The results provide new evidence on the crosscutting adversities that were exacerbated by the Great Recession and on the deep connection of race to persistent and compounded deprivation in the transition to adulthood.

Has Consumption Inequality Mirrored Income Inequality? Mark Aguiar , Mark Bils

Has Consumption Inequality Mirrored Income Inequality?

Author: Mark Aguiar , Mark Bils
Publisher: American Economic Review
Date: 09/2015

We revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality. We do so by constructing an alternative measure of consumption expenditure using a demand system to correct for systematic measurement error in the Consumer Expenditure Survey. Our estimation exploits the relative expenditure of high- and low-income households on luxuries versus necessities. This double differencing corrects for measurement error that can vary over time by good and income. We find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures.

Improving the Measurement of Consumer Expenditures

Improving the Measurement of Consumer Expenditures

Publisher: University of Chicago Press
Date: 06/2015

Robust and reliable measures of consumer expenditures are essential for analyzing aggregate economic activity and for measuring differences in household circumstances. Many countries, including the United States, are embarking on ambitious projects to redesign surveys of consumer expenditures, with the goal of better capturing economic heterogeneity. This is an appropriate time to examine the way consumer expenditures are currently measured, and the challenges and opportunities that alternative approaches might present.      

Improving the Measurement of Consumer Expenditures begins with a comprehensive review of current methodologies for collecting consumer expenditure data. Subsequent chapters highlight the range of different objectives that expenditure surveys may satisfy, compare the data available from consumer expenditure surveys with that available from other sources, and describe how the United States’s current survey practices compare with those in other nations.

What Money Doesn't Buy: Class Resources and Children's Participation in Organized Extracurricular Activities Elliot B. Weininger, Annette Lareau, Dalton Conley

What Money Doesn't Buy: Class Resources and Children's Participation in Organized Extracurricular Activities

Author: Elliot B. Weininger, Annette Lareau, Dalton Conley
Publisher: Social Forces
Date: 05/2015

Recent research suggests that participation in organized extracurricular activities by children and adolescents can have educational and occupational payoffs. This research also establishes that participation is strongly associated with social class. However, debate has ensued—primarily among qualitative researchers—over whether the association between class and activities stems exclusively from inequalities in objective resources and constraints or whether differing cultural orientations have a role. We address this debate using a nationally representative sample of children's time diaries, merged with extensive information on their families, to model participation in, and expenditures on, organized activities. While we cannot directly observe cultural orientations, we account for a substantially wider array of resources and constraints than previous studies. We find that, above and beyond these factors, maternal education has a consistently large effect on the outcomes we study. We discuss the plausibility of a cultural interpretation of this result, as well as alternative interpretations.

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