How Pronounced Is the U-Curve? Revisiting Income Inequality in the United States, 1917-1945
35 Pages Posted: 13 Jun 2017 Last revised: 5 Feb 2018
Date Written: February 4, 2018
In this article, we offer an improvement upon the top income share series produced by Piketty and Saez (2003) for the United States, focusing upon the period prior to and including the Second World War. The inequality estimates for these years form the left-side of a century-long U-curve that has achieved widespread acceptance in the literature. However, a number of issues deriving from the limitations of tax data in first half of the 20th century likely distort the magnitude and timing of depicted distributional patterns up to 1943. By revisiting available source data, we supplement the Piketty-Saez series with an improved measure of deductible income and correct a number of distortions that arise from adjustments within the original estimates. Our revised distributional shares complement the original series in depicting a declining pattern of inequality in this period, but with its locus now shifted to the extended effects of the Great Depression following an inequality peak in 1928-1929. When our revised estimates are linked to other refinements of the Piketty and Saez series, the century long distributional pattern for the U.S. resembles more of a century-long tea-saucer pattern as distinct from the pronounced inequality U-curve.
Keywords: Inequality, Top Incomes, US Economic History
JEL Classification: H2, N32
Suggested Citation: Suggested Citation