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Top Income Inequality in the 21st Century: Some Cautionary Notes

Author

Listed:
  • Guvenen, Fatih

    (Federal Reserve Bank of Minneapolis)

  • Kaplan, Greg

    (University of Chicago)

Abstract

We revisit recent empirical evidence about the rise in top income inequality in the United States, drawing attention to key issues that we believe are critical for an informed discussion about changing inequality since 1980: the definition of income (labor versus total), the unit of analysis (individual versus tax unit), the importance of partnership and S-corporation income, income shifting between the corporate and personal sectors in response to tax incentives, the definition of the top of the distribution, and trends in the middle and bottom of the distribution. Our goal is to inform researchers, policymakers, and journalists who are interested in top income inequality.

Suggested Citation

  • Guvenen, Fatih & Kaplan, Greg, 2017. "Top Income Inequality in the 21st Century: Some Cautionary Notes," Quarterly Review, Federal Reserve Bank of Minneapolis, issue October, pages 2-15.
  • Handle: RePEc:fip:fedmqr:00003
    DOI: 10.21034/qr.3811
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    File URL: https://www.minneapolisfed.org/research/qr/qr3811.pdf
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    References listed on IDEAS

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    1. Michael Cooper & John McClelland & James Pearce & Richard Prisinzano & Joseph Sullivan & Danny Yagan & Owen Zidar & Eric Zwick, 2016. "Business in the United States: Who Owns It, and How Much Tax Do They Pay?," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 91-128.
    2. Daniel R. Feenberg & James M. Poterba, 1993. "Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 145-177 National Bureau of Economic Research, Inc.
    3. Alan J. Auerbach & James M. Poterba, 1987. "Why Have Corporate Tax Revenues Declined?," NBER Chapters,in: Tax Policy and the Economy, Volume 1, pages 1-28 National Bureau of Economic Research, Inc.
    4. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    5. Jon Bakija & Adam Cole & Bradley Heim, 2008. "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data," Department of Economics Working Papers 2010-22, Department of Economics, Williams College, revised Jan 2012.
    6. Owen Zidar & Eric Zwick & Danny Yagan & Matthew Smith, 2017. "Capitalists in the 21st Century," 2017 Meeting Papers 1064, Society for Economic Dynamics.
    7. Emmanuel Saez, 2012. "Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2009 and 2010 estimates)," Technical Notes 201202, World Inequality Lab.
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    Citations

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    Cited by:

    1. Bruce D. Meyer & James X. Sullivan, 2017. "Consumption and income inequality in the US since the 1960s," AEI Economics Working Papers 953873, American Enterprise Institute.
    2. Florian Scheuer & Joel Slemrod, 2019. "Taxation and the Superrich," NBER Working Papers 26207, National Bureau of Economic Research, Inc.
    3. repec:eee:exehis:v:70:y:2018:i:c:p:25-41 is not listed on IDEAS
    4. Greg Kaplan & Sam Schulhofer-Wohl, 2018. "The Changing (Dis-)utility of Work," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 239-258, Summer.
    5. Pogorelskiy, Kirill & Traub, Stefan, 2017. "Skewness, Tax Progression, and Demand for Redistribution : Evidence from the UK," CRETA Online Discussion Paper Series 29, Centre for Research in Economic Theory and its Applications CRETA.
    6. Wolfgang Keller & William W. Olney, 2017. "Globalization and Executive Compensation," Department of Economics Working Papers 2017-04, Department of Economics, Williams College, revised Feb 2018.
    7. Vincenzo Quadrini & Qi Sun & yicheng wang, 2019. "Capitalist Human Capital," 2019 Meeting Papers 1155, Society for Economic Dynamics.
    8. Brant Abbott & Giovanni Gallipoli, 2018. "Human Capital Inequality: Empirical Evidence," Working Papers 2018-085, Human Capital and Economic Opportunity Working Group.

    More about this item

    Keywords

    Income inequality; Top income shares; Top 1 percent; Entrepreneurial income; Pass-through entities;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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