Is Wealth Becoming More Polarized in the United States?

Jerome Levy Economics Institute of Bard College Working Paper No. 330

29 Pages Posted: 16 Jul 2001

See all articles by Conchita D'Ambrosio

Conchita D'Ambrosio

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS)

Edward N. Wolff

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER); Bard College - Levy Economics Institute

Date Written: May 2001

Abstract

Recent work has documented a rising degree of wealth inequality in the United States between 1983 and 1998. In this paper we look at another dimension of the distribution: polarization. Using techniques developed by Esteban and Ray (1994) and extended by D'Ambrosia (2001), we examine whether a similar pattern exists with regard to trends in wealth polarization over this period. The approach followed provides a decomposition method, based on counterfactual distributions, that allows one to monitor which factors modified the entire distribution and precisely where on the distribution these factors had an effect. An index of polarization is provided, as are summary statistics of the observed movements and of distance and divergence among the estimated and the counterfactual distributions. The decomposition method is applied to U.S. data on the distribution of wealth between 1983 and 1998. We find that polarization between homeowners and tenants and among different educational groups continuously increased from 1983 to 1998, while polarization by income class continuously decreased. In contrast, polarization by racial group increased from 1983 to 1989 and then declined from 1989 to 1998, while polarization by age group followed the opposite pattern. We also find that most of the observed variation in the overall wealth density over the 1983?98 period can be attributed to changes in the within-group wealth densities rather than changes in household characteristics.

Suggested Citation

D'Ambrosio, Conchita and Wolff, Edward N., Is Wealth Becoming More Polarized in the United States? (May 2001). Jerome Levy Economics Institute of Bard College Working Paper No. 330, Available at SSRN: https://ssrn.com/abstract=276900 or http://dx.doi.org/10.2139/ssrn.276900

Conchita D'Ambrosio (Contact Author)

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

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Italy

Edward N. Wolff

New York University (NYU) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Bard College - Levy Economics Institute

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United States

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