Income Distribution

Why Income Inequality Is Here to Stay

Before the global financial crisis, income inequality was relegated to the underworld of economics. The motives of those who studied it were impugned. According to Martin Feldstein, the former head of Reagan’s Council of Economic Advisors, such people must have been motivated by envy. Robert Lucas, a Nobel prize winner, thought that “nothing [is] as poisonous” to sound economics as “to focus on questions of distribution.” But amid bailouts, unemployment, and ever-fresh financial scandals among the top 1%, the issue of income inequality has seeped into the mainstream economics and become a legitimate subject of research.

Income Inequality in the United States, 1913 1998

This paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the United States using individual tax returns data. Top income and wages shares display a U-shaped pattern over the century. Our series suggest that …