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The growth of US top income inequality: A hierarchical redistribution hypothesis

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  • Fix, Blair

Abstract

What accounts for the growth of US top income inequality? This paper proposes a hierarchical redistribution hypothesis. The idea is that US firms have systematically redistributed income to the top of the corporate hierarchy. I test this hypothesis using a large scale hierarchy model of the US private sector. My method is to vary the rate that income scales with hierarchical rank within modeled firms. I find that this model is able to reproduce four intercorrelated US trends: (1) the growth of the top 1% income share; (2) the growth of the CEO pay ratio; (3) the growth of the dividends share of national income; and (4) the "fattening" of the entire income distribution tail. This result supports the hierarchical redistribution hypothesis. It is also consistent with the available empirical evidence on within-firm income redistribution.

Suggested Citation

  • Fix, Blair, 2018. "The growth of US top income inequality: A hierarchical redistribution hypothesis," Working Papers on Capital as Power 2018/05, Capital As Power - Toward a New Cosmology of Capitalism.
  • Handle: RePEc:zbw:capwps:201805
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    Cited by:

    1. Palma, J. G., 2019. "Why is inequality so unequal across the world? Part 2 The diversity of inequality in market income - and the increasing asymmetry between the distribution of income before and after taxes and transfer," Cambridge Working Papers in Economics 19100, Faculty of Economics, University of Cambridge.
    2. Fix, Blair, 2019. "How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class," SocArXiv t8muy, Center for Open Science.
    3. Fix, Blair, 2019. "How the rich are different: Hierarchical power as the basis of income size and class," Working Papers on Capital as Power 2019/02 (v.2), Capital As Power - Toward a New Cosmology of Capitalism.

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    More about this item

    Keywords

    top income share; inequality; hierarchy; power; functional income distribution; personal income distribution;
    All these keywords.

    JEL classification:

    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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