IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v53y2020icp149-161.html
   My bibliography  Save this article

Income polarization in the USA: What happened to the middle class in the last few decades?

Author

Listed:
  • Schettino, Francesco
  • Khan, Haider A.

Abstract

With increasing income inequality in the US over the last few decades, what has happened to the middle class? The aggregate inequality indexes don't answer this question. We employ Relative Distribution tools and use the ASEC-CPS dataset in order to provide an analysis of the US income distribution and trace the impact of inequality on the middle class. We observe confirming the Pew study of 2016a typical polarization profile has emerged during 1998–2018 with a shift of many middle class families towards the lower end of income distribution. The hypothesis of the hollowing out of the middle class in the US starting with the age of Reaganomics is also confirmed. We also find some preliminary evidence for intersectionality, i.e. race, class and gender working together in a vicious cycle for the disadvantaged. Policies to counteract these tendencies must be anti-polarization policies along with those of relatively more egalitarian growth.

Suggested Citation

  • Schettino, Francesco & Khan, Haider A., 2020. "Income polarization in the USA: What happened to the middle class in the last few decades?," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 149-161.
    • Handle: RePEc:eee:streco:v:53:y:2020:i:c:p:149-161
    DOI: 10.1016/j.strueco.2019.12.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X19301973
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2019.12.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Joan Esteban & Carlos Gradín & Debraj Ray, 2007. "An Extension of a Measure of Polarization, with an application to the income distribution of five OECD countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 1-19, April.
    2. Paul Andres Corral Rodas & Vasco Molini & Gbemisola Oseni, 2019. "No Condition is Permanent: Middle Class in Nigeria in the Last Decade," Journal of Development Studies, Taylor & Francis Journals, vol. 55(2), pages 294-310, February.
    3. Kanbur, Ravi & Zhang, Xiaobo, 2001. "Fifty Years of Regional Inequality in China: A Journey through Revolution, Reform and Openness," CEPR Discussion Papers 2887, C.E.P.R. Discussion Papers.
    4. Esteban, Joan & Ray, Debraj, 1994. "On the Measurement of Polarization," Econometrica, Econometric Society, vol. 62(4), pages 819-851, July.
    5. Joan Esteban & Debraj Ray, 2011. "Linking Conflict to Inequality and Polarization," American Economic Review, American Economic Association, vol. 101(4), pages 1345-1374, June.
    6. Michael C. Wolfson, 1997. "Divergent Inequalities: Theory And Empirical Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 401-421, December.
    7. Wolfson, Michael C, 1994. "When Inequalities Diverge," American Economic Review, American Economic Association, vol. 84(2), pages 353-358, May.
    8. Jenkins, Stephen P., 1995. "Did the middle class shrink during the 1980s? UK evidence from kernel density estimates," Economics Letters, Elsevier, vol. 49(4), pages 407-413, October.
    9. Wolfson, Michael, 1997. "Divergent Inequalities - Theory and Empirical Results (Revised Edition)," Analytical Studies Branch Research Paper Series 1997066e, Statistics Canada, Analytical Studies Branch.
    10. Fernando Borraz & Nicolás Gonzalez Pampillón & Máximo Rossi, 2011. "Polarization and the Middle Class," Documentos de Trabajo (working papers) 2011, Department of Economics - dECON.
    11. Jeffrey James & Haider A. Khan, 1998. "Technological Systems and Development," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-26413-1.
    12. James Foster & Michael Wolfson, 2010. "Polarization and the decline of the middle class: Canada and the U.S," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(2), pages 247-273, June.
    13. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2004. "Polarization: Concepts, Measurement, Estimation," Econometrica, Econometric Society, vol. 72(6), pages 1737-1772, November.
    14. Haider A. Khan, 2007. "Social Accounting Matrix: A Very Short Introduction for Economic Modeling," CIRJE F-Series CIRJE-F-477, CIRJE, Faculty of Economics, University of Tokyo.
    15. Jeffrey James & Haider A. Khan, 1998. "The Employment Effects of an Income Redistribution in Developing Countries," Palgrave Macmillan Books, in: Technological Systems and Development, chapter 5, pages 87-104, Palgrave Macmillan.
    16. Gordon Anderson & Oliver Linton & Teng Leo, 2012. "A polarization-cohesion perspective on cross-country convergence," Journal of Economic Growth, Springer, vol. 17(1), pages 49-69, March.
    17. Riccardo Massari, 2009. "Is income becoming more polarized Italy? A closer look with a distributional approach," Working Papers 1, Doctoral School of Economics, Sapienza University of Rome.
    18. Maria Socorro & Carlos C. Bautista & Dalisay S. Maligalig & Noli R. Sotocinal, 2013. "Income Polarization in Asia," Asian Economic Papers, MIT Press, vol. 12(2), pages 101-136, Summer.
    19. Clementi, Fabio & Molini, Vasco & Schettino, Francesco, 2018. "All that Glitters is not Gold: Polarization Amid Poverty Reduction in Ghana," World Development, Elsevier, vol. 102(C), pages 275-291.
    20. Satya R. Chakravarty, 2009. "Inequality, Polarization and Poverty," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-79253-8, Fall.
    21. Jenkins, Stephen P, 1996. "Recent Trends in the UK Income Distribution: What Happened and Why?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(1), pages 29-46, Spring.
    22. Jeffrey James & Haider A. Khan, 1998. "Technology Choice and Income Distribution," Palgrave Macmillan Books, in: Technological Systems and Development, chapter 6, pages 105-130, Palgrave Macmillan.
    23. Haider Ali Khan, 2004. "Globalization: Challenges and Opportunities," CIRJE F-Series CIRJE-F-260, CIRJE, Faculty of Economics, University of Tokyo.
    24. F. Clementi & A. L. Dabalen & V. Molini & F. Schettino, 2017. "When the Centre Cannot Hold: Patterns of Polarization in Nigeria," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 608-632, December.
    25. Atkinson, Anthony B., 2015. "Inequality: what can be done?," LSE Research Online Documents on Economics 101810, London School of Economics and Political Science, LSE Library.
    26. Fabio Clementi & Francesco Schettino, 2015. "Declining Inequality in Brazil in the 2000s: What is Hidden Behind?," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(7), pages 929-952, October.
    27. Schettino, Francesco & Gabriele, Alberto & Khan, Haider A., 2021. "Polarization and the middle class in China: A non-parametric evaluation using CHNS and CHIP data," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 251-264.
    28. Satya R. Chakravarty & Amita Majumder, 2001. "Inequality, Polarisation and Welfare: Theory and Applications," Australian Economic Papers, Wiley Blackwell, vol. 40(1), pages 1-13, March.
    29. Pier Luigi Conti & Maria Grazia Pittau & Roberto Zelli, 2006. "Metodi non parametrici nell'analisi della distribuzione del reddito: problemi empirici ed aspetti metodologici," Rivista di Politica Economica, SIPI Spa, vol. 96(3), pages 195-242, May-June.
    30. Haider A. Khan, 2010. "Development Strategies: Lessons from the Experiences of South Korea, Malaysia, Thailand and Vietnam," WIDER Working Paper Series wp-2010-010, World Institute for Development Economic Research (UNU-WIDER).
    31. Ali Alichi & Mr. Kory Kantenga & Mr. Juan Sole, 2016. "Income Polarization in the United States," IMF Working Papers 2016/121, International Monetary Fund.
    32. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
    33. Carlos Gradín, 2000. "Polarization By Sub‐Populations In Spain, 1973–91," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(4), pages 457-474, December.
    34. Khan, Haider A. & Thorbecke, Erik, 1989. "Macroeconomic effects of technology choice: Multiplier and structural path analysis within a SAM framework," Journal of Policy Modeling, Elsevier, vol. 11(1), pages 131-156.
    35. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-139, June.
    36. Haider A. Khan, 2004. "On Mortality and Poverty: An Axiomatic Approach With A Modified Index," CIRJE F-Series CIRJE-F-281, CIRJE, Faculty of Economics, University of Tokyo.
    37. Wolfson, Michael C, 1997. "Divergent Inequalities: Theory and Empirical Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 401-421, December.
    38. James, M.J. & Khan, H., 1997. "Technology choice & income distribution," Other publications TiSEM 6f76a538-55bd-4a1b-bcbb-5, Tilburg University, School of Economics and Management.
    39. Arthur Alderson & Jason Beckfield & Francois Nielsen, 2005. "Exactly How has Income Inequality Changed? Patterns of Distributional Change in Core Societies," LIS Working papers 422, LIS Cross-National Data Center in Luxembourg.
    40. Francois Bourguignon, 2004. "The Poverty-growth-inequality triangle," Indian Council for Research on International Economic Relations, New Delhi Working Papers 125, Indian Council for Research on International Economic Relations, New Delhi, India.
    41. Satya R. Chakravarty, 2015. "Inequality, Polarization and Conflict," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, edition 127, number 978-81-322-2166-1, Fall.
    42. Nanak Kakwani, 1993. "Poverty And Economic Growth With Application To Côte D'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-139, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clementi,Fabio & Fabiani,Michele & Molini,Vasco & Schettino,Francesco, 2022. "Is Inequality Systematically Underestimated in Sub-Saharan Africa ? A Proposal toOvercome the Problem," Policy Research Working Paper Series 10058, The World Bank.
    2. Zhang, Chen & Yu, Yangcheng & Li, Qinghai, 2023. "Top incomes and income polarisation in China," China Economic Review, Elsevier, vol. 77(C).
    3. Schettino, Francesco & Scicchitano, Sergio & Suppa, Domenico, 2024. "COVID 19 and Wage Polarization: A task based approach," GLO Discussion Paper Series 1398, Global Labor Organization (GLO).
    4. Della Porta, Donatella & Galbraith, James & Pianta, Mario, 2022. "Introduction to the special issue ‘The political consequences of inequality’," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 389-390.
    5. Vide Romana Korez & Zavrl Irena & Hunjet Anica, 2021. "Exploring Emerging Markets’ Demographic and Macroeconomic Dynamics and the Middle Class Growth: The Case of China and India," Naše gospodarstvo/Our economy, Sciendo, vol. 67(4), pages 33-55, December.
    6. Lazar Ilic & M Sawada, 2021. "The temporal evolution of income polarization in Canada’s largest CMAs," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-27, June.
    7. Chiara Assunta Ricci & Sergio Scicchitano, 2021. "Decomposing changes in income polarization by population group: what happened during the crisis?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 235-259, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schettino, Francesco & Gabriele, Alberto & Khan, Haider A., 2021. "Polarization and the middle class in China: A non-parametric evaluation using CHNS and CHIP data," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 251-264.
    2. Khan, Haider & Schettino, Francesco, 2018. "Income Polarization in the USA (1983-2016): what happened to the middle class?," MPRA Paper 85554, University Library of Munich, Germany.
    3. F. Clementi & A. L. Dabalen & V. Molini & F. Schettino, 2017. "When the Centre Cannot Hold: Patterns of Polarization in Nigeria," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 608-632, December.
    4. Fabio Clementi & Francesco Schettino, 2013. "Income polarization in Brazil, 2001-2011: A distributional analysis using PNAD data," Economics Bulletin, AccessEcon, vol. 33(3), pages 1796-1815.
    5. Clementi,F. & Fabiani,M. & Molini,V., 2018. "The devil is in the details : growth, polarization, and poverty reduction in Africa in the past two decades," Policy Research Working Paper Series 8494, The World Bank.
    6. Chiara Assunta Ricci & Sergio Scicchitano, 2021. "Decomposing changes in income polarization by population group: what happened during the crisis?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 235-259, April.
    7. Clementi, Fabio & Molini, Vasco & Schettino, Francesco, 2018. "All that Glitters is not Gold: Polarization Amid Poverty Reduction in Ghana," World Development, Elsevier, vol. 102(C), pages 275-291.
    8. Schettino, Francesco & Scicchitano, Sergio & Suppa, Domenico, 2024. "COVID 19 and Wage Polarization: A task based approach," GLO Discussion Paper Series 1398, Global Labor Organization (GLO).
    9. Satya Chakravarty & Bhargav Maharaj, 2012. "Ethnic polarization orderings and indices," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 7(1), pages 99-123, May.
    10. Ilaria Petrarca & Roberto Ricciuti, 2015. "Relative income distribution in six European countries: market and disposable income," LIS Working papers 629, LIS Cross-National Data Center in Luxembourg.
    11. Fabio Clementi & Francesco Schettino & Enzo Valentini, 2017. "Squilibri distributivi e criminalità nelle regioni italiane," Working Papers 48-2017, Macerata University, Department of Studies on Economic Development (DiSSE), revised May 2017.
    12. Ricci, Chiara Assunta & Scicchitano, Sergio, 2021. "The role of Great Recession on income polarization by population groups," GLO Discussion Paper Series 766, Global Labor Organization (GLO).
    13. Marta Pascual & David Cantarero & Paloma Lanza, 2018. "Health polarization and inequalities across Europe: an empirical approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(8), pages 1039-1051, November.
    14. Zhang, Chen & Yu, Yangcheng & Li, Qinghai, 2023. "Top incomes and income polarisation in China," China Economic Review, Elsevier, vol. 77(C).
    15. Satya R. Chakravarty & Conchita D'Ambrosio, 2010. "Polarization Orderings Of Income Distributions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(1), pages 47-64, March.
    16. Walter Bossert & William Schworm, 2008. "A Class of Two‐Group Polarization Measures," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1169-1187, December.
    17. Satya Chakravarty & Bhargav Maharaj, 2011. "Measuring ethnic polarization," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(3), pages 431-452, September.
    18. Juan Gabriel Rodríguez, 2015. "A Class of Social Welfare Functions That Depend on Mean Income and Income Polarization," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(3), pages 422-439, September.
    19. Chiara Gigliarano & Daniel Nowak & Karl Mosler, 2019. "A Polarization Index for Overlapping Groups," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 712-735, December.
    20. Iñaki Permanyer, 2012. "The conceptualization and measurement of social polarization," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(1), pages 45-74, March.

    More about this item

    Keywords

    Polarization; Political economy of the US; Relative distribution tools; Middle class; Inequalities; Growth effect; Distribution effect;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:53:y:2020:i:c:p:149-161. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.