Search

Most people in the United States agree they want some income inequality but debate exactly how much is fair. High‐status people generally prefer more inequality than low‐status individuals. Here we examine how much preferences for inequality are (or are not) driven by self‐interest. Past work has generally investigated this idea in two ways: The first is by stratifying preferences by income, and the second is by randomly assigning financial status within lab‐constructed scenarios. In this paper, we develop a method that combines both experimental control and the social experience of inequality—a simulated society experiment. Across two experiments (N = 138, observations = 690), participants voted on the distribution of rewards—first behind a veil of ignorance, and then when they were randomly assigned a status within a game of chance. Status varied repeatedly across five rounds, allowing us to measure dynamic preferences. Under the veil of ignorance, people preferred inequality favoring the top status. When the veil of ignorance disappeared, self‐interest immediately influenced inequality preferences. Those who randomly landed in top positions were satisfied with the status quo established under the veil of ignorance, whereas those who randomly landed in bottom positions wanted more equality. Yet these preferences were not stable; decisions about the optimal level of inequality changed according to changes in social status. Our results also showed that, when inequality grows in a society, preferences regarding inequality become polarized by social status. Individuals in low‐status positions, particularly, tend to demand more equality. [ABSTRACT FROM AUTHOR]

The article comments on a paper published within the issue, "Taxation and the Incidence of Homeownership Across Income Groups," by Robert H. Litzenberger and Howard B. Sosin. The author feels that this paper is a generally sound framework for the analysis of homeownership incentives, but criticizes the its simplifying assumptions and the lackluster attention given to the impact of inflation. The author discusses the implication that a change in the paper's capital gains tax assumption strengthens the conclusions that are not adequately supported by the presented analysis.

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

There have been a number of studies analyzing the impact of unions on labor's share of income. Most have relied on either time series or cross-section data. The purpose of this paper is to determine the impact of unions on labor's share of income in the U.S. This study adds to the understanding of this topic by developing an analytical model of imperfect competition and estimating the model using panel data for the manufacturing sector. This study finds that unions have a positive impact on labor's share of income. Specifically, this paper finds that labor's share declined 17.9 percent between 1997 and 2006 whereas, if unionization density had remained at its 1997 level, labor's share would have declined only 13.9 percent. Thus, the decline in unionization explains about 29 percent of the decline in labor's share of income. This paper is important for three reasons. First, this paper sheds light on whether social and institutional forces play an important role in determining the distribution of income between labor and capital. Second, it helps to explain recent increases in wage inequality. Third, it has implications for understanding the potential impact of legislation, such as the Employee Free Choice Act, that would make it easier for workers in the U.S. to unionize. [ABSTRACT FROM AUTHOR]

The article discusses the measurements for inequality and poverty that requires focusing on the details while examining the overall picture, in which the U.S. can learn from Europe's research and experience. It notes that many of the conference papers focuses on alternative measures of income, evaluates its impact on inequality and poverty from the joint Organisation for Economic Cooperation and Development (OECD)/Universtiy of Maryland conference that was held in Paris, France. The papers highlight the impact of making changes that affects measurement while the details provides insight for the determination of the best measure to use for poverty and inequality.

This paper introduces a new comprehensive panel of annual state-level income inequality measures spanning the postwar period 1945–2004. For many states, the share of income held by the top decile experienced a prolonged period of stability after World War II, followed by a substantial increase in inequality during the 1980s and 1990s. This paper also presents an examination of the long-run relationship between income inequality and economic growth. Our findings indicate that the long-run relationship between inequality and growth is positive in nature and driven principally by the concentration of income in the upper end of the income distribution. ( JEL D31, O40) [ABSTRACT FROM AUTHOR]

In this paper, we outline (i) why σ-convergence may not accompany β-convergence, (ii) discuss evidence of β-convergence in the United States, and (iii) use U.S. county-level data containing over 3,000 cross-sectional observations to demonstrate that σ-convergence cannot be detected at the county level across the United States, or within the large majority of the individual U.S. states considered separately. Indeed, in many cases statistically significant σ- divergence is found. [ABSTRACT FROM AUTHOR]

This paper studies an economy where parents can choose between public or private schools and can vote on taxes used to fund public schools. The model is calibrated to US data and studied using simulations. A bimodal income distribution emerges where public education students converge to a low-income equilibrium while private education students experience endogenous growth with higher incomes. However, public education students experience long-run growth through a spillover from private education students. Possible problems with the existence of a private alternative to pubic education, such as the emergence of a education-based class structure, are identified. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Important new evidence on racial employment discrimination in the United States has been provided by Comanor (1973) who demonstrated that racial discrimination in hiring was a pervasive part of the US labor market in the mid-1960s. While Comanor showed significant employment effects of discrimination, he did not directly examine the related issue of racial wage rate differentials. In view of recent interest in the stability of US black-white income differences (e.g. Ashenfelter, 1970; Freeman, 1973a, b; Wohlstetter and Coleman, 1972), the issue of wage rate discrimination is of added interest, for these income differentials may result just from discriminatory hiring practices (blacks are forced to work in low-wage industries), or from a combination of wage rate discrimination and a disadvantageous employment distribution.
We seek in this paper to test statistically for the existence of wage rate differences between comparably employed blacks and whites and men and women. Because we have individual level information for 1960, 1967 and 1970, we are able to examine the question of wage rate discrimination more closely than in other studies. The plan of the paper is as follows. Section I discusses the measurement problems posed by actually testing for wage rate discrimination with Census data; Section II discusses the problems of inferring discrimination with various statistical models; Section III presents and interprets the empirical results for 1960, 1967 and 1970, and discusses the problem of sample size fragmentation; Section IV concludes. [ABSTRACT FROM AUTHOR]

This paper assesses the effects of U.S. tax policy reforms on inequality over around three decades, from 1979 to 2007. It applies a new method for decomposing changes in government redistribution into (1) a direct policy effect resulting from policy changes and (2) the effects of changing market incomes. Over the period as a whole, the tax policy changes increased income inequality by pushing up the income share of high-income earners (the top 20%). ( JEL H23, H31, H53, P16) [ABSTRACT FROM AUTHOR]

Does switching the composition of jobs between low-paying and high-paying industries have important effects on wages in other sectors? In this paper, we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors. In this class of models, wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using U.S. Census data. We find that sector-level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial. We interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages, and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

ABSTRACT. This paper analyzes the relationship between income inequality and economic growth within the United States using state level data. It describes income inequality in the U.S. since 1960, then employs a two-step causal model to test the institutionalist contention that income inequality leads to socio-political instability, which has a negative impact on economic progress. The empirical results offer support for the institutionalist view. [ABSTRACT FROM AUTHOR]

Provides distribution-free inferences for testing marginal rank dominance and Lorenz, and generalized Lorenz dominances. Relationships holding between an income distribution and its dependent after-event distribution; Asymptomatic normal distributions of sample marginal changes; Re-evaluation of marginal impacts of working wives of the United States family income distribution.

This paper utilizes a joint distribution of components of income and commodity group expenditures to analyze inequality in the marginal distributions of various components of income. Estimation efficiency[1] is gained by recognition of the interdependence of the income components and commodity group expenditures. In addition, an analysis of inequality in the marginal distribution of any income component is made possible. By examining inequality within a component of income, information is gained by the policymaker in evaluating redistributional effects of specific public policy actions. For example, the impact of changes in the rate of taxation of long term capital gains or changes in the holding period of assets subject to long term capital gains taxation has an impact on the measure of inequality in the marginal distribution of income from the sale of capital assets and a potentially different impact on the measure of inequality in the marginal distribution of total income. Over time individuals can alter income sources (e.g., the sale of a capital asset changes interest and dividend income into capital gains), and therefore it is important for the policy maker to distinguish the short run effects within an income component from the long term effects on total income inequality generated by any policy action. The purpose of this paper has been to present comprehensive measures of inequality in the marginal distribution of ten components of income and in the marginal distribution of total income for the United States for the years 1952-1981. Since accepted economic theory tells us that expenditures by consumers are not statistically independent of the income consumers receive, a more efficient way of examining comprehensive economic inequality is to utilize a joint distribution of commodity expenditures and components of income. This not only allows us to estimate inequality more efficiently by incorporating more information into the estimation process, but... [ABSTRACT FROM AUTHOR]

We analyze the role of selection bias in generating changes in the observed distribution of female hourly wages in the United States using CPS data for the years 1975 to 2020. We account for selection bias from the employment decision by modeling the distribution of the number of working hours and estimating a nonseparable model of wages. We decompose changes in the wage distribution into composition, structural, and selection effects. Composition effects increased wages at all quantiles while the impact of the structural effects varied by time period and quantile. Changes in the role of selection only appeared at the lower quantiles of the wage distribution. The evidence suggests that there was positive selection in the 1970s, which diminished until the later 1990s. This reduced wages at lower quantiles and increased wage inequality. Post 2000 there appears to be an increase in positive sorting, which reduced the selection effects on wage inequality. [ABSTRACT FROM AUTHOR]

Previous studies that tried to assess the effects of an uncertainty measure on income distribution in the United States used volatility of income as a measure of uncertainty. We use the policy uncertainty index as our measure of uncertainty, which is said to be much more comprehensive than income volatility and assess its asymmetric impact on a measure of income inequality in each state of the United States We find much more significant results compared to previous studies. While we find short‐run asymmetric effects of policy uncertainty in 41 states, short‐run effects translate into the long‐run asymmetric effects in 25 states. Furthermore, we find that while in 20 states decreased policy uncertainty worsened income inequality in 14 states increased policy uncertainty improved it. [ABSTRACT FROM AUTHOR]

We introduce and characterize a new measure of aggregate income growth that allows us to give more weight to individuals with lower individual income growth. Our measure includes several important measures of directional mobility encountered in the literature. The empirical application compares the measure of income growth between the USA and Germany, and finds that giving more weight to individuals with lower income growth reverses the ranking. [ABSTRACT FROM AUTHOR]

The article presents a study exploring the assumption that government transfer policy in the U.S. is implicitly if not explicitly indexed and also the actual extent of indexing. Both the uses side and the sources side incidence of domestic climate policy using an analytical general equilibrium model was analyzed by taking into account the degree of government program indexing. The study found that changes on the user-side are relatively more burdensome for low income households.

The article focuses on the differences between relative and absolute measures of poverty as discussed at the International Conference on Measuring Poverty, Income Inequality, and Social Exclusion: Lessons from Europe jointly hosted by the Organisation for Economic Co-operation and Development (OECD) and the University of Maryland. The author systematically compared and contrasted European Union (EU) and U.S. poverty measurement methods and their fundamental differences using the expositional method developed by M. Forster and M. M. d'Ercole. Tables showing European poverty rates by member state using alternative solidarity group medians and state child poverty rates in the U.S. using alternative solidarity group medians are offered.

The rise in cross-sectional earnings inequality in Sweden between 1990 and 2002 is decomposed into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables. The Swedish experience is then compared with that in the United States. In both countries, the rise in earnings inequality is a consequence of rising upper-tail dispersion. Contrary to the U.S. experience, where the rise is largely driven by changing market prices of observables and increased residual dispersion, shifts in the Swedish labor-force composition have contributed positively to the rise in the p90–p50 gap. The rise in the Swedish p99–p90 gap, however, is entirely accounted for by changes in prices and residual dispersion. [ABSTRACT FROM AUTHOR]

The article reviews the published writings on the poverty dynamics in the U.S. It enumerates the methods used in poverty dynamic literatures including tabulation, life table, and multivariate hazard rate. It surveys the most dominant data, theories and methods used to answer major questions such as how will people escape the vicious cycle of poverty? until when they will remain living in poverty? and what events led to their entry to poverty as well as the event to escape from it? Reviews done reveal that most researchers continue to measure poverty using the official poverty definition, though slight modification has also been done. It adds that studies also draw on the same two data sets including Survey of Income and Program Participation and the Panel Study of Income Dynamics.

The article highlights the shortcomings of the current official U.S. poverty measure and describes steps to improve the nation's measurement of poverty and economic need. It focuses on the Headcount measures of poverty and other poverty measurement approaches that have been implemented in the U.S. The U.S. poverty measure is said to be usually seen as a measure of serious economic need or economic deprivation. Mollie Orshansky, an employee of the Social Security Administration, proposed the official U.S. poverty definition and was charged with putting together a measure of economic need to offer data useful to the War on Poverty initiatives.

We construct the first direct classification of goods as luxuries or necessities that is compatible with international trade data. We then use it to test an idea that has not been tested directly in the literature: Countries' income distributions are important determinants of their import demand, and, in particular, of the difference in their import demands of luxuries versus necessities. We interpret this result with the aid of a model in which preferences are nonhomothetic, thus relaxing a long-held and standard--but empirically dubious--assumption in the theory of international trade. Our model is strongly borne out by the results: Imports of luxuries increase with the importing country's inequality, and imports of necessities decrease with it. Our calculations imply that if income distribution in the United States became as equal as in Canada, the United States would import about 9-13% fewer luxury goods and 13-19% more necessities. [ABSTRACT FROM AUTHOR]

Using semiparametric density estimation techniques, we analyse the effect of rising dispersion of men's earnings and related changes in family behaviour on increasing inequality in the distribution of family income in the United States. For the period 1969–1989, the growing dispersion of men's earnings and changing family structure can account for most of the rise in family income inequality. By contrast, the increase in labour force participation by women offset this trend. Inequality grew at a slower rate in the 1990s than in earlier decades, largely because of stabilization in the relative earnings of men from low-income families. [ABSTRACT FROM AUTHOR]

Objective. This article compares recent levels and trends in economic inequality in industrialized nations, largely those belonging to the Organization for Economic Cooperation and Development. We also examine the effects of government policies and social spending efforts on inequality. Method. We use data from the Luxembourg Income Study and the U.S. Congressional Budget Office to measure disposable money income on an annual basis for 30 nations around the end of the 20th century. We also convert the incomes of a set of rich nations into real 2000 U.S. dollars, using a standard measure of purchasing power parity to examine absolute differences in income inequality. Results. The United States has the highest overall level of inequality of any rich OECD nation at the beginning of the 21st century. Moreover, increases in the dispersion of total household income in the United States have been as large as, or larger than, those experienced elsewhere between 1979 and 2002. Government policies and social spending have lesser effects in the United States than in any other rich nation, and both low spending and low wages have a great impact on the final income distribution, especially among the nonelderly. Conclusion. We speculate on the role policy plays in the final determination of income inequality. We argue that these differences cannot be explained by demography (single parents, immigrants, elders) but are more likely to be attributed to American institutions and lack of spending effort on behalf of low-income working families. [ABSTRACT FROM AUTHOR]

The paper presents a decomposition of income mobility indices into two basic sources: mobility induced by a change of the income distribution shape, and mobility induced by a reordering of individuals in the income pecking order. The decomposition procedure, based on counterfactual distributions, results in a decomposition that is applicable to a broad class of mobility measures. Application to income ‘movement’ indices with data for Belgium, Western Germany and the USA indicates that reranking has been the major force behind income mobility. [ABSTRACT FROM AUTHOR]

Focuses on income inequality as a public health concern in the United States. Possible mechanisms that might relate income inequality with health outcomes; Summary of studies that have addressed the income inequality/health connection; Patterns of social spending that affect health.

Many distributions have been used as descriptive models for the size distribution of income. This paper considers two generalized beta distributions which include many of these models as special or limiting cases. These generalized distributions have not been used as models for the distribution of income and provide a unified method of comparing many models previously considered. Expressions are reported which facilitate parameter estimation and the analysis of associated means, variances, and various measures of inequality. The distributions considered are fit to U.S. family income and their relative performance is compared. [ABSTRACT FROM AUTHOR]

This paper applies stochastic dominance, a relatively new approach to studying income distributions, to investigate the effects of recent growth and recessions on the U.S. income distribution. Rather than looking at a single summary statistic such as per capita GNP across time, we consider the entire income distribution and measure economic performance by looking at a number of points within the distribution. Our objective is twofold. First, we use recent developments in income distribution theory and measurement to present inference based measures of the U.S. income distributions across time. Second, we address the question of how recent growth and recessions have impacted on the well-being of specific income groups and classes. The powerful first degree stochastic dominance theorem provides Paretian partial orders of economic well-being based on income distribution (quantile) functions. We apply the FSD principle and use CPS microdata to test for year-to-year changes in U.S. per capita economic well-being over the period 1967 and 1986. In addition, we consider a more restrictive welfare criterion, conditional FSD, which adds the requirement that an improvement in economic well-being cannot occur unless the incomes of individuals in the poorest decile improve. Finally, we truncate the income distributions and use stochastic dominance to evaluate changes in the status of the lower, middle and upper income classes. Using the original Paretian interpretation of first degree dominance, we are able to rank 17 of 19 year-to-year comparisons. The two years that are not ranked involve recession related comparisons in which incomes fell significantly at the bottom of the distribution and rose significantly at the top. [ABSTRACT FROM AUTHOR]

This study examines the ability of the simple human capital model to explain earnings inequality among white males in 48 medium-to-large-sized Standard Metropolitan Statistical Areas (SMSAs) in 1969. Data are from the 1/100 file of the 1970 Census. The sample is restricted to white, non-student, non-farm males between the ages of 15 and 64 with some earnings in 1969.[3]
The simple human capital model, as developed by Chiswick and Mincer, relates earnings inequality to the levels, dispersions, and intercorrelations of schooling, experience, weeks worked, and the parameters of the earnings function. Estimation of earnings functions using individual data within each of 48 SMSAs allows us to specify a priori the values of the model's coefficients, thus providing a rigorous test of the simple model. The hypothesis that all of the coefficients of the model are as predicted is not accepted at a .05 significance level, but cannot be rejected at a .01 level. The human capital framework does prove to be a particularly useful framework by which to analyze the major determinants of earnings inequality. Findings here call into question the results of previous studies which have found increased levels of schooling and of income to have a direct equalizing effect on the size distribution. The evidence presented in this paper also illustrates the importance of accounting for inter-area differences in earnings function parameters in economic analyses of inequality. [ABSTRACT FROM AUTHOR]

Focuses on the income inequality trend in the United States following the 1982 recession. Factors behind the income inequality trend; Changes in the income distribution of various types of families between 1983 and 1987; Policy implications of the existence of income inequality in the country.

Historical measures of income inequality in the United States must grapple with the challenge of data quality. We examine one such problem affecting the well‐known estimates of income inequality produced by Piketty and Saez (2003) using the records of the Internal Revenue Service (IRS). Prior to 1943, incomes were self‐reported. Combined with lax enforcement on the part of the IRS, self‐reporting of incomes could provide a misleading portrait of the income distribution. To test the accuracy of IRS records, we compare them to independently tabulated state income tax returns between 1919 and 1945 from states with more comprehensive and rigorously enforced tax collection procedures. State income tax records show lower overall levels of income inequality than IRS records. However, we still find that top income concentrations declined across the period between 1929 and World War II. These findings attest to the sensitivity of distributional estimation to the reporting selectivity and economic quality of underlying tax data, suggesting that the existing IRS‐derived series systematically overstates top‐income concentration in the interwar period. [ABSTRACT FROM AUTHOR]

This article tests whether places with higher exposure to unionization during the 1940s, due to their pre‐existing industrial composition, tended to have larger declines in wage inequality, conditional on local economic and demographic observables and regional trends. We find a strong negative correlation between exposure to unionization and changes in local inequality from 1940–50 and 1940–60. This does not appear to be underpinned by skill‐specific sorting of workers or by firms leaving places with high exposure to unionization. We also find that the correlation between exposure to unionization in the 1940s and the change in inequality after 1940 persists in long‐difference regressions to the end of the twentieth century. [ABSTRACT FROM AUTHOR]

Abstract: Substantial literature has been produced on the increasing wage gap in the United States, invoking various possible factors, but largely ignoring the relationship between firm size and wage distribution. In this study, the author decomposes wage differences over time between large, medium and small firms, identifying the effects of observed characteristics (and their returns) along with residual inequality, i.e. inequality among workers with the same observed characteristics. From 1992 to 2012, trends at small, medium and large firms became more uniform, while wage inequality rose across the board. Significantly, it increased more quickly in the upper half of the wage distribution and at large firms, where residual inequality was highest. [ABSTRACT FROM AUTHOR]

We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state-level data. Our analysis is based upon the 'unified' framework offered by Galor and Moav (2004) while the empirics account for cross-section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929-2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. ( JEL I21, O47, C23) [ABSTRACT FROM AUTHOR]

No voters cast their votes based on perfect information, but richer voters are on average best informed. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, income is more important in affecting voting behaviour for more informed voters than for less informed voters. Further, when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory. [ABSTRACT FROM AUTHOR]

Frank (2009) constructed a comprehensive panel of state-level income inequality measures using individual tax filing data from the Internal Revenue Service. Employing an array of cointegration exercises for the data, he reported a positive long-run relationship between income inequality and the real income per capita in the United States. This article questions the validity of his findings. First, we suggest a misspecification problem in his approach regarding the order of integration in the inequality index, which shows evidence of nonstationarity only for the post-1980 data. Second, we demonstrate that his findings are not reliable because the panel cointegration test he used requires cross-section independence, which is inappropriate for the U.S. state-level data. Employing panel tests that allow cross-section dependence, we find no evidence of cointegration between inequality and the real income. ( JEL D31, O40) [ABSTRACT FROM AUTHOR]

Despite post-college degree holders now making up nearly 15% of the US adult workforce, studies of their labour market performance remain sparse. This is surprising given that they are the most educated group in the labour force and as, over time, they have done significantly better than all other education groups. We show a significant rise over time in the postgraduate wage premium, reflecting an increased relative demand due to their superior skill sets and occupational status. The increase in the demand for postgraduates is a key factor behind rising wage inequality within the increasingly heterogeneous college graduate workforce. [ABSTRACT FROM AUTHOR]

Inconsistent censoring in the public-use March Current Population Survey ( CPS) limits its usefulness in measuring labor earnings trends, as previous approaches for imputing topcoded earnings systematically understate top earnings. Using Pareto estimation methods with less-censored internal data, we create an enhanced cell-mean series to capture top earnings in the public-use data. Annual earnings inequality trends since 1963 using our series largely mirror those found by Kopczuk, Saez, and Song using social security administration data for commerce and industry workers. When we extend our analysis to 2013 and consider all workers, earnings inequality levels are higher but its growth is more modest. ( JEL C81, D31, J01) [ABSTRACT FROM AUTHOR]

In American metropolitan areas, households are highly mixed by income with higher average incomes at greater distances from downtown. Also, suburbs attract families with children, while poor households and small households with young heads select sites close to the commercial core. These empirical observations and others are predicted by this standard model of a monocentric city with three major modifications. Time at work is controlled by employers, not employees. Households with more members at home consume in the same house more housing services. Finally, lot prices need not be proportional to area. In the resulting equilibrium, households are mixed by income and separated by family size. This contrasts with classic urban models where households are separated only by their workers' wage rates. [ABSTRACT FROM AUTHOR]

Recent research on U.S. levels and trends in income inequality varies substantially based on how these studies measure income. We crosswalk (move between standards) from a market income of tax units to a more comprehensive measure of income including realized capital gains of households using a unified data set and replicate common findings in the literature. By using a comprehensive income definition in the spirit of Haig-Simons, considering yearly accrued capital gains rather than focusing on the delayed reporting of capital gains that appear in Internal Revenue Service tax return data, the observed growth in income inequality and top income shares since 1989 is dramatically reduced. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article presents a historical overview of the late 20th-century advent of financialization, that is, the unprecedented growth of the financial sector. We summarize its origins and consequences, particularly greater income inequality. An econometric model quantifies the relationship. We conclude that along with higher unemployment and an eroding minimum wage, the growth of the U. S. financial sector has contributed to the exacerbation of inequality in recent decades. [ABSTRACT FROM AUTHOR]

We argue that financial market development contributed to the rise in the skill premium and residual wage inequality in the United States since the 1980s. We present an endogenous growth model with imperfect credit markets and establish how improving the efficiency of these markets affects modes of production, innovation, and wage dispersion between skilled and unskilled workers. The experience of U.S. states following banking deregulation provides empirical support for our hypothesis. We find that wages of skilled workers increased by between 0.5% and 6.3% following deregulation while those of unskilled workers fell by between 3.5% and 8.7%. Similarly, residual (or within-group) inequality increased; the 90-50 percentile ratio of residuals from a Mincerian wage regression and their standard deviation increased by 4.2% and 1.7%, respectively. [ABSTRACT FROM AUTHOR]

This study employs state-level panel data to explore the relationship between inward foreign direct investment (FDI) and income inequality in the United States. Using panel cointegration techniques that allow for cross-sectional heterogeneity and cross-sectional dependence, we find that, in the long run, FDI exerts a significant and robust negative effect on income inequality in the United States. This result for the United States as a whole does not imply that FDI narrows income gaps in each individual state. There is considerable heterogeneity in the long-run effects of FDI on income inequality across states, with some states (21 out of 48 cases) exhibiting a positive relationship between FDI in income inequality.( JEL F21, D31, C23) [ABSTRACT FROM AUTHOR]

Objectives. This study assesses whether need-based grants are equally conducive to the college persistence of students from various economic strata and the extent to which a redistribution of funds can narrow economic-based inequality in college persistence. Methods. To estimate the causal effect of need-based grants on several persistence outcomes the discontinuity created in the dollar amounts of Pell grants when the students have siblings attending college is exploited. The analyses use a nationally representative sample of students enrolled at four-year institutions in 1995. Results. While the allocation of Pell Grants responds to students' pecuniary constraints, institutional and state grants expand the circle of recipients to more well-off students. Yet, it is only the persistence of students from the bottom half of the income distribution that is sensitive to aid amounts. If the need-based funds granted to affluent students had been diverted to these students, the gap in first-year persistence would have been closed. Conclusions. For a redistribution of funds to boost degree attainment and achieve equality of educational opportunity it must be based on stricter means-tested allocations of nonfederal funds as they are the main source of need-based aid. [ABSTRACT FROM AUTHOR]

The increase in income inequality in the United States over the past three decades has been well documented, though Americans differ in their perceptions of rising inequality. In this article we investigate the degree to which context shapes individuals' perceptions of rising income inequality in the United States. Using objective data on state-level income inequality and survey data from the 2004 American National Election Study (ANES), we estimate a series of ordered logit models depicting individuals' perceptions of rising income inequality as a function of state income inequality and various control variables. We find that individuals residing in states with high income inequality are more likely than other individuals to perceive large increases in national income inequality over the past 20 years. We also consider possible interaction effects for state income inequality with political knowledge and family income, but our evidence suggests that such effects are limited to family income. We find that individuals from lower income strata are more likely to translate state income inequality into inequality perceptions than those with higher incomes. State inequality context significantly shapes individuals' perceptions of rising income inequality, particularly among those with lower incomes. [ABSTRACT FROM AUTHOR]

To analyze the effects of patent policy on growth and inequality, this article develops a quality-ladder model with wealth heterogeneity and elastic labor supply. The model predicts that strengthening patent protection increases (a) economic growth by stimulating spending on research and development and (b) income inequality by raising the return on assets. Elastic labor supply creates an additional effect on income inequality. As for consumption inequality, the effect is ambiguous and depends on the elasticity of intertemporal substitution. Calibrating the model to the U.S. data shows that strengthening patent protection increases income inequality by more than consumption inequality, and this pattern is consistent with the data. [ABSTRACT FROM AUTHOR]