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More Unequal We Stand? Inequality Dynamics in the United States, 1967–2021

Staff Report 648 | Published August 1, 2023

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Jonathan Heathcote Monetary Advisor
Fabrizio Perri Assistant Director and Monetary Advisor
Giovanni L. Violante Princeton University, CEBI, CEPR, IFS, IZA, and NBER
Lichen Zhang University of Hong Kong
More Unequal We Stand? Inequality Dynamics in the United States, 1967–2021


Heathcote et al. (2010) conducted an empirical analysis of several dimensions of inequality in the United States over the years 1967-2006, using publicly-available survey data. This paper expands the analysis, and extends it to 2021. We find that since the early 2000s, the college wage premium has stopped growing, and the race wage gap has stalled. However, the gender wage gap has kept shrinking. Both individual- and household-level income inequality have continued to rise at the top, while the cyclical component of inequality dominates dynamics below the median. Inequality in consumption expenditures has remained remarkably stable over time. Income pooling within the family and redistribution by the government have enormous impacts on the dynamics of household-level inequality, with the role of the family diminishing and that of the government growing over time. In particular, largely due to generous government transfers, the COVID recession has been the first downturn in fifty years in which inequality in disposable income and consumption actually declined.

Published in: _Review of Economic Dynamics_ (Vol. 50, October 2023, pp. 235-266),