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Is Wealth Becoming More Polarized in the United States?

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  • Conchita D'Ambrosio
  • Edward N. Wolff

Abstract

Recent work has documented a rising degree of wealth inequality in the United States between 1983 and 1998. In this paper we look at another dimension of the distribution: polarization. Using techniques developed by Esteban and Ray (1994) and extended by D'Ambrosia (2001), we examine whether a similar pattern exists with regard to trends in wealth polarization over this period. The approach followed provides a decomposition method, based on counterfactual distributions, that allows one to monitor which factors modified the entire distribution and precisely where on the distribution these factors had an effect. An index of polarization is provided, as are summary statistics of the observed movements and of distance and divergence among the estimated and the counterfactual distributions. The decomposition method is applied to U.S. data on the distribution of wealth between 1983 and 1998. We find that polarization between homeowners and tenants and among different educational groups continuously increased from 1983 to 1998, while polarization by income class continuously decreased. In contrast, polarization by racial group increased from 1983 to 1989 and then declined from 1989 to 1998, while polarization by age group followed the opposite pattern. We also find that most of the observed variation in the overall wealth density over the 1983-98 period can be attributed to changes in the within-group wealth densities rather than changes in household characteristics.

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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_330.

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Handle: RePEc:lev:wrkpap:wp_330

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  1. Esteban, J.M. & Ray, D., 1992. "On the Measurement of Polarization," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 171.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Rebecca M. Blank & David Card, 1993. "Poverty, Income Distribution, and Growth: Are They Still Connected," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 285-340.
  3. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, Elsevier, vol. 87(2), pages 379-415, August.
  4. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(3), pages 1333-81, September.
  5. D'Ambrosio, Conchita, 2001. "Household Characteristics and the Distribution of Income in Italy: An Application of Social Distance Measures," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 47(1), pages 43-64, March.
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Cited by:
  1. Juan Gabriel Rodríguez, 2004. "Measuring polarization, inequality, welfare and poverty," Economic Working Papers at Centro de Estudios Andaluces E2004/75, Centro de Estudios Andaluces.
  2. Robert Haveman & Edward Wolff, 2005. "The concept and measurement of asset poverty: Levels, trends and composition for the U.S., 1983–2001," Journal of Economic Inequality, Springer, Springer, vol. 2(2), pages 145-169, January.
  3. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2003. "Polarization: Concepts, Measurement, Estimation," Working Papers 46, Barcelona Graduate School of Economics.
  4. Juan Prieto Rodríguez & Juan Gabriel Rodríguez & Rafael Salas, 2004. "Interactions inequality-polarization: an impossibility result," Economic Working Papers at Centro de Estudios Andaluces E2004/64, Centro de Estudios Andaluces.
  5. Cobb-Clark, Deborah A. & Hildebrand, Vincent A., 2004. "The Wealth of Mexican Americans," IZA Discussion Papers 1150, Institute for the Study of Labor (IZA).
  6. Matías Horenstein & Sergio Olivieri, 2004. "Polarización del Ingreso en la Argentina: Teoría y Aplicación de la Polarización Pura del Ingreso," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0015, CEDLAS, Universidad Nacional de La Plata.
  7. Joan Esteban & Debraj Ray, 2005. "A Comparison of Polarization Measures," Working Papers 310, Barcelona Graduate School of Economics.
  8. Thomas Goda, 2014. "Global trends in relative and absolute wealth concentrations," DOCUMENTOS DE TRABAJO CIEF, UNIVERSIDAD EAFIT 010897, UNIVERSIDAD EAFIT.
  9. Modrego, F. & Celis, X. & Berdegué, J., 2008. "Polarización étnica de los ingresos rurales en el sur de Chile," Working papers, Rimisp Latin American Center for Rural Development 015, Rimisp Latin American Center for Rural Development.

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