How Pronounced is the U-Curve? Revisiting Income Inequality in the United States, 1917–60

Abstract Piketty and Saez (2003) found a pronounced U-curve pattern of American income inequality since 1917, displaying a precipitous decline during World War II to a level that would hold until 1980. We offer revisions to their income inequality estimates prior to 1960 with three important finding...

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Bibliographic Details
Published in:The Economic journal (London) 2022-10, Vol.132 (647), p.2366-2391
Main Authors: Geloso, Vincent J, Magness, Phillip, Moore, John, Schlosser, Philip
Format: Article
Language:English
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Summary:Abstract Piketty and Saez (2003) found a pronounced U-curve pattern of American income inequality since 1917, displaying a precipitous decline during World War II to a level that would hold until 1980. We offer revisions to their income inequality estimates prior to 1960 with three important findings. First, Piketty and Saez overstate inequality levels in this period. Second, the decline during World War II was smaller than depicted. Third, the Great Depression, rather than World War II, played the more significant role. These findings indicate a need to re-evaluate commonly held assumptions about the evolution of inequality during the period of the ‘great levelling’, as well as the nature of its posited relationship to tax policy.
ISSN:0013-0133
1468-0297
DOI:10.1093/ej/ueac020