Is the U-Curve That Pronounced? Revisiting Income Inequality in the United States, 1917-1945
31 Pages Posted: 13 Jun 2017 Last revised: 15 Jun 2017
Date Written: May 30, 2017
In this article, we reconsider the level and trend of the income inequality series produced by Piketty and Saez (2003, 2015) for the United States using tax data for the period prior to 1945, which forms the left-side of a century-long distributional Ucurve. We argue that there are reasons to doubt the depicted shape of the left-side of the U-curve of inequality. We make corrections to the series for reporting behavior conditional on tax regimes, minor changes to the definition of the tax unit population, and the fiscal income denominator. All of these corrections show comparatively stable top income shares throughout the period. We point out that comparisons with other state-level tax datasets - like Wisconsin which has conceptual advantages over the IRS data - yield dramatically different results that should make us skeptical of the trends observed with the IRS data.
Keywords: Inequality, Top Incomes, US Economic History
JEL Classification: H2, N32
Suggested Citation: Suggested Citation