Accounting for United States Household Income Inequality Trends: The Changing Importance of Household Structure and Male and Female Labor Earnings Inequality

Using a shift‐share analysis on March CPS data, this paper estimates the degree to which changes in labor earnings, employment, and marriage patterns account for household income inequality growth in the United States since 1979. The factors contributing to the rapid rise in income inequality in the 1980s differ substantially from those contributing to its slower increase since that time. Unlike findings for the 1980s when changes in the correlation of spouses' earnings accounted for income inequality growth, this factor is no longer a major contributor toward its continued increase. Additionally, the 2000s business cycle is the first full business cycle in at least 30 years where changes in earnings of male household heads accounted for declines in income inequality. Instead, the continued growth in income inequality in the 2000s was accounted for primarily by increases in female earnings inequality and declines in both male and female employment.     

Parental Wealth and the Black–White Mobility Gap in the U.S.

Utilizing longitudinal data from the Panel Study of Income Dynamics (PSID), this paper examines the relationship between parental wealth and intergenerational income mobility for black and white families. I find that total parental wealth is positively associated with upward mobility for low‐income white families, but is not associated with reduced likelihood of downward mobility for white families from the top half of the income distribution. Conversely, I find that total parental wealth does not have the same positive association for low‐income black families, while home ownership may have negative associations with the likelihood of upward mobility for these families. However, for black families from the top half of the income distribution, home equity is associated with a decreased likelihood of downward mobility, suggesting a heterogeneous relationship between home ownership and mobility for black families.     

Intergenerational Earnings and Income Mobility in Spain

This paper contributes to the large number of studies on intergenerational earnings and income mobility by providing new evidence for Spain. Since there are no Spanish surveys covering long‐term information on both children and their fathers' income or earnings, we deal with this selection problem using the two‐sample two‐stage least squares estimator. We find that intergenerational mobility in Spain is similar to that in France, lower than in the Nordic countries and Britain, and higher than in Italy and the United States. Furthermore, we use the Chadwick and Solon approach to explore intergenerational mobility in the case of daughters and we find similar results by gender.     

Gender earnings inequality in the service and manufacturing industries in the U.S.

This paper compares earnings inequality between women and men in a growing sector of the U.S. economy – the service sector, and a shrinking sector – manufacturing. We examine the hypothesis that deindustrialization will reduce inequality, and find that the absolute magnitude of the gender earnings gap is, in fact, smaller in the service sector. Decomposition analysis is used to partition the gender earnings gap into three parts: (1) earnings differences due to differences in mean characteristics – such as education and experience; (2) earnings differences due to preferential treatment of men; and (3) earnings differences due to disadvantageous treatment of women. The latter two constitute estimates of gender discrimination. The results of this study suggest that, ceteris paribus, deirndustrialization will likely reduce the gender gap in hourly earnings. However, this will come at the cost of lower earnings for both males and females, with the drop in earnings being particularly large for males. While deindustrialization is predicted to reduce the absolute magnitude of male-female earnings inequality, evidence suggests that gender discrimination will persist – discrimination explains about 60 percent of the gender wage gap in both the service and the manufacturing sectors.     

Earnings inequality and the business cycle

Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th century, when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.     

The gender difference in wages and the returns to schooling over the great recession in the U.S.

This paper examines the effects of the Great Recession on the gender difference in hourly wage and the rate of return to schooling in the United States. Using data from American Community Survey 2000–2015, we find that the male-female difference in hourly wage declined during and after the recession. The Great Recession decreased earnings for both men and women, especially for those with more education. We also find there is a significant gender difference in the effects of the Great Recession on the returns to schooling. The Great Recession increased the rate of return to schooling for both men and women, and the female-male difference in the returns to schooling decreased by 0.4 percentage points in the post-recession period. The change of the gender difference in the returns to schooling can be explained by the wage structure change for men and women over the recession.     

Intergenerational Earnings Mobility in Norway: Levels and Trends*

Using longitudinal data for Norwegian children born in 1950, 1955, 1960 and 1965, we find a relatively high degree of earnings mobility. There is no tendency toward decreasing mobility over the cohorts. Conditioning on the position in the earnings distribution, the analysis indicates quite high mobility in the middle of the distribution and somewhat more persistence at the top and bottom. This approach also reveals increased mobility over time for sons, but a less clear picture for daughters.     

Inequality of Income and Consumption in the U.S.: Measuring the Trends in Inequality from 1984 to 2011 for the Same Individuals

This paper examines the distribution of income and consumption in the U.S. using one dataset that obtains measures of both income and consumption from the same set of individuals. We develop a set of inequality measures that show the increase in inequality during the past 27 years using the 1984–2011 Consumer Expenditure Survey. We find that the trends in income and consumption inequality are similar between 1984 and 2006, and diverge during and after the Great Recession. For the entire 27‐year period we find that consumption inequality increases almost as much as does income inequality.     

The fiscal impact of high-skilled emigration: Flows of Indians to the U.S.

What are the fiscal consequences of high-skilled emigration for source countries? This paper develops methodologies for inferring these consequences and applies them to the recent sizable emigration of high-skilled workers from India to the U.S. This wave of emigration from India to the U.S. is shown to be unusually concentrated amongst the prime-age work force, the highly educated and high earners. In order to calculate the fiscal losses associated with these emigrants, estimates of their counterfactual earnings distributions are generated using two distinct methods and integrated with a model of the Indian fiscal system to calculate fiscal consequences. Conservative estimates indicate that the annual net fiscal impact to India of high-skilled emigration to the U.S. is one-half of 1% of gross national income (or 2.5% of total fiscal revenues). The sensitivity of these results to the method of predicting counterfactual incomes and the implications of these estimates for other developing countries is discussed in detail.     

Inequality of Happiness in the U.S.: 1972–2010

It is well accepted that a country's GDP may not fully reflect its level of well‐being. In recent years, happiness has emerged as an alternative indicator of well‐being, and research has mainly focused on determining the level of happiness. While it is important to look at the level, the distribution of happiness is also a salient aspect in any evaluation of inequality. There has been a growing interest in the distribution of happiness, although the ordinal nature of the data makes the use of standard inequality measures problematic. Our paper contributes to the literature by exploring the distributions for the U.S. from 1972 to 2010. Based on new methods developed for ordinal data, we are able to overcome the problems associated with ordinality and obtain unambiguous rankings of happiness distributions. We also compute the level of happiness inequality using existing measures based on median centred approaches. Further, we decompose the median based inequality measures of happiness by gender, race, and region.     

Differences in Work Hours and Hours Preferences by Race in the U.S.

Significant differences exist in actual and preferred work hours by race. Specifically, black males work 20 percent fewer annual hours than white males. The differences between black and white women are small. Black workers are significantly more likely than white workers to prefer additional work and fewer are satisfied with their current hours of work. I use the hours-inequality hypothesis of Bell and Freeman (1995,1997) to evaluate the extent to which race differences in work hours and hours preferences are related to race differences in incentives. I demonstrate that whereas white workers work longer hours in response to overall wage variation in their relevant labor market cell, black workers react to the wage variation among black workers but not to the variation overall. The fact that labor market incentives are different for otherwise similar black and white workers is difficult to reconcile with standard competitive theory.     

Rising Earnings Inequality in Sweden: The Role of Composition and Prices

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.     

Earnings and Languages in the Family: Second‐Generation Australians*

This paper uses Household, Income and Labour Dynamics in Australia data to assess the performance of second‐generation Australians in full‐time employment in 2007. It examines the role of job mismatch and cultural and linguistic diversity at the individual and family levels. The study accounts for non‐random sample selection. The new evidence shows that: (i) over‐education and over‐skilling carry a wage penalty; (ii) there are significant but heterogeneous second‐generation effects; and (iii) language effects explain most of the disadvantage associated with non‐English‐speaking background.     

Mexican real wages and the U.S. economy

This article examines real wage determinants from 1996 to 2014 across Mexican states. Real wages are determined in equilibrium by combining labor supply (years of education and population growth) and labor demand (mostly external factors) forces. Panel data models provide two main results. First, years of education and U.S. real GDP appear to be reliable predictors of wages in fixed effects models, with very marked changes after the U.S. 2008–2009 financial crisis and stronger effects on northern Mexican states. Second, dynamic panels confirm the role of foreign forces: positive from the U.S. economy and negative from the real exchange rate.     

Sexual identity and the lesbian earnings differential in the U.S.

Two decades of research on wage differentials by sexual orientation uses data-sets that do not ask respondents about their own sexual orientation, even though sexual identity is key to theories that explain why a wage differential might exist. We show that many women who claim a lesbian identity for themselves are not classified as lesbian by researchers using the behavioral proxies typically available in the data. Conversely, many women who describe themselves as heterosexual are classified as lesbian because they report sexual experiences with women. Misclassification may lead to erroneous conclusions about changes in labor market outcomes. The results highlight the need to develop robust methods for collecting data on sexual identity and for more research on the interrelationship between sexual identity and behavior, especially occupational choice.     

The Ethnic Employment and Income Gap in Sweden: Is Skill or Labor Market Discrimination the Explanation?*

This study uses a cognitive test score, the Swedish Military Enlistment test taken at age 18, to identify whether the ethnic employment and income gap in Sweden is caused by a pre‐market skill gap and/or ethnic discrimination. The employment gap and income gap are estimated for males born in Sweden with different ethnic backgrounds: their parents were born in Sweden or in southern Europe or outside Europe. Controlling for the cognitive test score does not affect the ethnic employment gap, and for incomes the ethnic income gap almost disappears.     

The U.S. trade imbalance and real exchange rate: An application of the heterogeneous panel cointegration method

The United States economy suffers from persistent trade deficits, arising from the so-called ‘global external imbalance’. Can the depreciation of the US dollar improve this phenomenon? This study for the first time applies the heterogeneous panel cointegration method to examine the long-run relationship between the real exchange rate and bilateral trade balance of the U.S. and her 97 trading partners for the period 1973–2006. Using new annual data, the empirical results indicate that the devaluation of the US dollar deteriorates her bilateral trade balance with 13 trading partners, but improves it with 37 trading partners, especially for China. In the panel cointegrated framework, a long-run negative relationship between the real exchange rate and the bilateral trade balance exists for the U.S.     

Income and Wealth Inequality in Asia and the Pacific: Trends,Causes, and Policy Remedies

The Asia–Pacific region's rapid growth and poverty reduction in recent decades have been accompanied by rising income and wealth inequality. Technological progress, globalization, deregulation and market-oriented reform, and financialization have generated many new opportunities, but rewarded capital more than labor, benefited skilled workers more than the unskilled, widened spatial inequality, and produced a growing number of the superrich. For some countries, population aging has also contributed to rising inequality. The present paper provides an update on recent trends of income and wealth inequality in the Asia–Pacific region, examines causes behind rising inequality, and discusses policy actions needed to tackle inequality. It also assesses how the COVID-19 has likely worsened inequality in the region.     

Modeling nonlinear Granger causality between the oil price and U.S. dollar: A wavelet based approach

In this paper, we use a wavelet approach to study the linear and nonlinear Granger causality between the real oil price and the real effective U.S. Dollar exchange rate. Instead of analyzing the time series at their original level, as it is usually done, we first decompose the two macroeconomic variables at various scales of resolution using wavelet decomposition and then we study the relationships among the decomposed series on a scale by scale basis. A major finding of this paper is that the linear and nonlinear causal relationships between the real oil price and the real effective U.S. Dollar exchange rate vary over frequency bands as it depends on the time scales. Indeed, there is a strong bidirectional causal relationship between the real oil price and the real dollar exchange rate for large time horizons, i.e. corresponding to fundamentalist traders, especially fund managers and institutional investors. But, for the first frequency band which corresponds to a class of traders whom investment horizon is about 3-months and whom trading is principally speculative (noise traders), the causality runs only from the real oil prices to real effective U.S dollar exchange rate.     

Changes in Occupational Earnings along the U.S.-Mexico Border between 1900 and 1920

In a 2006 paper, Professor Gregory Hayden argued that system dynamics is an inadequate tool for explaining the institutional systems principles of hierarchy, feedback and openness. The purpose of this paper is to show that many of Professor Hayden's claims are either misguided or incorrect. The paper also reinforces the argument that system dynamics modeling can add significant value to traditional institutional economic analysis.