Income Distribution and Macroeconomic Performance in the United States

IMF Working Papers, August 1, 1996

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The factors underlying the rise in U.S. income inequality since the mid-1970s are examined.
The results suggest that "the trend increase in income inequality has not been related to macroeconomic developments, such as income growth or import penetration, but that the income distribution is sensitive to the cycle."
Important factors that do help explain the widening of the income distribution include "the increased investment in technology and the decline in the minimum wage."
Demographic changes that help explain movements in income shares include:
- "the rise in the share of single female-headed households,"
- "the increased proportion of households headed by someone over the age of 35," and
- "the fall in the child-dependency ratio."

Increased investment in technology.
Decline in the minimum wage.
Demographic shifts:
- Rise in the share of single female-headed households.
- Increased proportion of households headed by someone over the age of 35.
- Fall in the child-dependency ratio.

Trend increase in income inequality: not related to macroeconomic developments such as income growth or import penetration.
Income distribution: sensitive to the business cycle.

Subject: Consumption distribution, Income distribution, Income inequality, Labor, Minimum wages, National accounts, Personal income, Wages
Keywords: Consumption distribution, Europe, Gini coefficient, Gini-ratio equation, income, income distribution, Income distribution, Income inequality, income share, income-share equation, Personal income, quintile, quintile share, share, Wages, WP

IMF Working Paper No. 1996/097 — August 1, 1996