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More Unequal We Stand? Inequality Dynamics in the United States 1967-2021

Author

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  • Heathcote, Jonathan
  • Perri, Fabrizio
  • Violante, Giovanni
  • Zhang, Lichen

Abstract

Heathcote et at. (2010) conducted an empirical analysis of several dimensions of inequality in the United States over the years 1967-2006 using publicly-available survey data. This paper expands the analysis, and extends it until 2021. We find that since the early 2000s, the college wage premium has stopped growing and the race gap has stalled, but the gender wage gap has kept shrinking. Both individual- and household-level income inequality have continued to rise at the top, while the cyclical component of inequality dominates dynamics below the median. Inequality in consumption expenditures has remained remarkably stable over time. Income pooling within the family and redistribution by the government have enormous impacts on the dynamics of household-level inequality, with the role of the family declining relative to that of the government over time. In particular, largely thanks to generous government transfers, the COVID recession has been the first downturn in fifty years in which inequality in disposable income and consumption actually declined.

Suggested Citation

  • Heathcote, Jonathan & Perri, Fabrizio & Violante, Giovanni & Zhang, Lichen, 2023. "More Unequal We Stand? Inequality Dynamics in the United States 1967-2021," CEPR Discussion Papers 18294, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18294
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    2. Giovanni L. Violante, 2024. "A Comment on: “Walras–Bowley Lecture: Market Power and Wage Inequality” by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren," Econometrica, Econometric Society, vol. 92(3), pages 637-641, May.
    3. Ferriere, Axelle & Grübener, Philipp & Sachs, Dominik, 2024. "Optimal Redistribution: Rising Inequality vs. Rising Living Standards," CEPR Discussion Papers 19107, C.E.P.R. Discussion Papers.
    4. Belloc, Ignacio & Molina, José Alberto & Velilla, Jorge, 2025. "Inheritance Shocks and Expenditure Patterns: A Dynamic Collective Approach," IZA Discussion Papers 18243, Institute of Labor Economics (IZA).
    5. James (Jim) C. MacGee & Joel Rodrigue, 2024. "The Distributional Origins of the Canada-US GDP and Labour Productivity Gaps," Staff Working Papers 24-49, Bank of Canada.
    6. Jalles, João Tovar & Karras, Georgios, 2024. "Tax progressivity and income inequality in the US," Economics Letters, Elsevier, vol. 238(C).
    7. Bilbiie, F. O. & Galaasen, S. M. & Gurkaynak, R. S. & Maehlum, M. & Molnar, K, 2025. "Hanksson," Cambridge Working Papers in Economics 2516, Faculty of Economics, University of Cambridge.
    8. Fabio Milani, 2025. "Inflation, Monetary Policy, and Capital-Labor Inequality," CESifo Working Paper Series 12065, CESifo.
    9. Felipe Alves & Giovanni L. Violante, 2024. "From Micro to Macro Hysteresis: Long-Run Effects of Monetary Policy," Staff Working Papers 24-39, Bank of Canada.
    10. Mark Robinson & Pedro Silos & Diego Vilán, 2025. "Household Debt, the Labor Share, and Earnings Inequality," Finance and Economics Discussion Series 2025-028, Board of Governors of the Federal Reserve System (U.S.).
    11. Darapheak Tin & Chung Tran & Nabeeh Zakariyya, 2025. "The Evolution of the Earnings Distribution in a Sustained Growth Economy: Evidence from Australia," ANU Working Papers in Economics and Econometrics 2025-704, Australian National University, College of Business and Economics, School of Economics.
    12. Bilbiie, F. O. & Galaasen, S. M. & Gurkaynak, R. S. & Maehlum, M. & Molnar, K, 2025. "Hanksson," Cambridge Working Papers in Economics 2516, Faculty of Economics, University of Cambridge.

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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