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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. Blair Fix, 2021. "How the rich are different: hierarchical power as the basis of income size and class," Journal of Computational Social Science, Springer, vol. 4(2), pages 403-454, November.
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    3. Fix, Blair, 2019. "How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class," SocArXiv t8muy, Center for Open Science.
    4. 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.

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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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