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INEQUALITY AND GROWTH IN THE UNITED STATES: EVIDENCE FROM A NEW STATE-LEVEL PANEL OF INCOME INEQUALITY MEASURES

Authors

  • MARK W. FRANK

    1. Frank: Associate Professor, Department of Economics and International Business, Sam Houston State University, Box 2118, Huntsville, TX 77341. Phone 1-936-294-4890, Fax 936-294-3488, E-mail markfrank@shsu.edu.
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      I am grateful for the insights offered by Edward F. Blackburne, Donald G. Freeman, and Hiranya K. Nath, and the comments of two anonymous referees. I also thank David Mathews, Jennifer George, Swapna Easwar, Gabi Eissa, and Sadaf Monam for their excellent assistance in the construction of the inequality and human capital data. Thanks also to Charles Hicks at the Internal Revenue Service for graciously providing state-level individual tax filing data for the years 1982–1987. I am grateful for the financial support provided by the Faculty Research Grant from the College of Business Administration at Sam Houston State University. All errors remain my responsibility.


Abstract

This paper introduces a new comprehensive panel of annual state-level income inequality measures spanning the postwar period 1945–2004. For many states, the share of income held by the top decile experienced a prolonged period of stability after World War II, followed by a substantial increase in inequality during the 1980s and 1990s. This paper also presents an examination of the long-run relationship between income inequality and economic growth. Our findings indicate that the long-run relationship between inequality and growth is positive in nature and driven principally by the concentration of income in the upper end of the income distribution. (JEL D31, O40)

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