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The Spillover Effects of Top Income Inequality

Author

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  • Gottlieb, Joshua
  • Hémous, David
  • Hicks, Jeffrey
  • Olsen, Morten

Abstract

Top income inequality in the United States has increased considerably within occupations. This phenomenon has led to a search for a common explanation. We instead develop a theory where increases in income inequality originating within a few occupations can “spill over†through consumption into others. We show theoretically that such spillovers occur when an occupation provides non-divisible services to consumers, with physicians our prime example. Examining local income inequality across U.S. regions, the data suggest that such spillovers exist for physicians, dentists, and real estate agents. Estimated spillovers for other occupations are consistent with the predictions of our theory.

Suggested Citation

  • Gottlieb, Joshua & Hémous, David & Hicks, Jeffrey & Olsen, Morten, 2023. "The Spillover Effects of Top Income Inequality," CEPR Discussion Papers 18212, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18212
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    2. Jing Yuan & Yinghui Wang & Jinxin Cao & Zongwu Cai, 2025. "Impact of Artificial Intelligence on Occupational Income Inequality in China," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202504, University of Kansas, Department of Economics, revised Feb 2025.
    3. Davis, Donald R. & Dingel, Jonathan I., 2020. "The comparative advantage of cities," Journal of International Economics, Elsevier, vol. 123(C).
    4. Schetter, Ulrich & Tejada, Oriol, 2018. "Globalization and the Concentration of Talent," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181562, Verein für Socialpolitik / German Economic Association.
    5. Joshua D. Gottlieb & Maria Polyakova & Kevin Rinz & Hugh Shiplett & Victoria Udalova, 2023. "Who Values Human Capitalists' Human Capital? The Earnings and Labor Supply of U.S. Physicians," NBER Working Papers 31469, National Bureau of Economic Research, Inc.
    6. Facundo Albornoz & Antonio Cabrales & Esther Hauk, 2019. "Occupational Choice with Endogenous Spillovers," The Economic Journal, Royal Economic Society, vol. 129(621), pages 1953-1970.
    7. Philippe Aghion & Ufuk Akcigit & Antonin Bergeaud & Richard Blundell & David Hemous, 2019. "Innovation and Top Income Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(1), pages 1-45.

    More about this item

    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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