Towards a Performance Measure of Income Inequality: Trends in Income 1975-2018

19 Pages Posted: 26 Oct 2021 Last revised: 27 Oct 2021

See all articles by Kathryn Anne Edwards

Kathryn Anne Edwards

RAND Corporation - Pardee RAND Graduate School

Carter Price

affiliation not provided to SSRN

Date Written: October 19, 2021

Abstract

This work introduces two novel methods in measuring income inequality. The first uses publicly available tax summary data to improve estimates of top-coded income in the Current Population Survey. The second is a time-period agnostic and income-level agnostic measure of inequality that relates income growth to economic growth. This new metric, the Growth Share Measure, can be applied over long stretches of time, applied to subgroups of interest, and easily calculated. We apply both methods to the time period 1975-2018 to show the trends in income inequality relative to per capita gross domestic product. We find that only incomes at the top 1 percent paced economic growth over this period. We discuss how our inequality measure could be applied to public program evaluation in a manner similar to the supplemental poverty rates.

Keywords: Income inequality, median income, top-coding, poverty

JEL Classification: D31, E01

Suggested Citation

Edwards, Kathryn and Price, Carter, Towards a Performance Measure of Income Inequality: Trends in Income 1975-2018 (October 19, 2021). RAND Working Paper Series WR- A516-1, Available at SSRN: https://ssrn.com/abstract=3693432 or http://dx.doi.org/10.2139/ssrn.3693432

Kathryn Edwards (Contact Author)

RAND Corporation - Pardee RAND Graduate School ( email )

1776 Main Street
Santa Monica, CA 90401
United States

HOME PAGE: http://www.kathrynanneedwards.com

Carter Price

affiliation not provided to SSRN

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