Is Wealth Becoming More Polarized in the United States?
AbstractRecent 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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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0106006.
Length: 29 pages
Date of creation: 29 Jun 2001
Date of revision:
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 29; figures: included
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Other versions of this item:
- Conchita D'Ambrosio & Edward N. Wolff, . "Is Wealth Becoming More Polarized in the United States?," Economics Working Paper Archive wp_330, Levy Economics Institute.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-07-13 (All new papers)
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