Finance and American Inequality in the Last Century

38 Pages Posted: 8 Feb 2012

See all articles by Jong Hee Park

Jong Hee Park

University of Chicago - Department of Political Science

Date Written: February 7, 2012

Abstract

Rising top income shares in the US have received increased attention both within and outside of academia. In this paper, we argue that the size of the top income share in the US has been consistently shaped by the evolution of the financial sector. We test our hypotheses connecting finance and the top income share over time using empirical methods that probe the co-evolution of historical time series data: Granger causality tests, cointegration tests, and error correction model analysis. We find that the growth of the financial sector has had negative impacts on the equal distribution of market incomes in the US during the last century. Specifically, financial developments have increased the portion of national income accruing to the richest 1%, and the richest 0.01% in particular, as well as increasing the level of poverty in the US during the last century.

Keywords: Finance, Top Income Share, Granger Causality, Cointegration, Error Correction Model, Bayesian Change-point Analysis

Suggested Citation

Park, Jong Hee, Finance and American Inequality in the Last Century (February 7, 2012). Available at SSRN: https://ssrn.com/abstract=2000936 or http://dx.doi.org/10.2139/ssrn.2000936

Jong Hee Park (Contact Author)

University of Chicago - Department of Political Science ( email )

Chicago, IL 60637
United States

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