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The Deepening Divide Within the Rich as a Key Driver of U.S. Economic Inequality

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  • Hyeongwoo Kim
  • Donggyu Sul

Abstract

Using a statistically robust decomposition framework, we assess group-level contributions to overall economic inequality. Applying this approach to comprehensive microdata spanning from 1962 to 2019, we find that the recent surge in U.S. inequality is primarily driven by rising within-group income dispersion among the top decile of earners, rather than by between-group inequality (mean differences) relative to the rest of the population. Specifically, our results indicate that over 87% of post-2000 U.S. pre-tax income inequality can be attributed to income variation within the top 10%, with the top 1% alone accounting for more than 70%. Our post-tax income analysis reveals a similar, though slightly weaker, pattern. A further decomposition by income source underscores the growing importance of within-group labor income dispersion among top earners in driving U.S. economic inequality.

Suggested Citation

  • Hyeongwoo Kim & Donggyu Sul, 2025. "The Deepening Divide Within the Rich as a Key Driver of U.S. Economic Inequality," Auburn Economics Working Paper Series auwp2025-03, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2025-03
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    File URL: https://cla.auburn.edu/econwp/Archives/2025/2025-03.pdf
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    References listed on IDEAS

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    1. James E. Foster & Efe A. Ok, 1999. "Lorenz Dominance and the Variance of Logarithms," Econometrica, Econometric Society, vol. 67(4), pages 901-908, July.
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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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