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Income polarization in the USA: What happened to the middle class in the last few decades?

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  • Schettino, Francesco
  • Khan, Haider A.

Abstract

With increasing income inequality in the US over the last few decades, what has happened to the middle class? The aggregate inequality indexes don't answer this question. We employ Relative Distribution tools and use the ASEC-CPS dataset in order to provide an analysis of the US income distribution and trace the impact of inequality on the middle class. We observe confirming the Pew study of 2016a typical polarization profile has emerged during 1998–2018 with a shift of many middle class families towards the lower end of income distribution. The hypothesis of the hollowing out of the middle class in the US starting with the age of Reaganomics is also confirmed. We also find some preliminary evidence for intersectionality, i.e. race, class and gender working together in a vicious cycle for the disadvantaged. Policies to counteract these tendencies must be anti-polarization policies along with those of relatively more egalitarian growth.

Suggested Citation

  • Schettino, Francesco & Khan, Haider A., 2020. "Income polarization in the USA: What happened to the middle class in the last few decades?," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 149-161.
    • Handle: RePEc:eee:streco:v:53:y:2020:i:c:p:149-161
    DOI: 10.1016/j.strueco.2019.12.003
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    Cited by:

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    2. Vide Romana Korez & Zavrl Irena & Hunjet Anica, 2021. "Exploring Emerging Markets’ Demographic and Macroeconomic Dynamics and the Middle Class Growth: The Case of China and India," Naše gospodarstvo/Our economy, Sciendo, vol. 67(4), pages 33-55, December.
    3. Della Porta, Donatella & Galbraith, James & Pianta, Mario, 2022. "Introduction to the special issue ‘The political consequences of inequality’," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 389-390.
    4. Chiara Assunta Ricci & Sergio Scicchitano, 2021. "Decomposing changes in income polarization by population group: what happened during the crisis?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 235-259, April.
    5. Lazar Ilic & M Sawada, 2021. "The temporal evolution of income polarization in Canada’s largest CMAs," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-27, June.
    6. Clementi,Fabio & Fabiani,Michele & Molini,Vasco & Schettino,Francesco, 2022. "Is Inequality Systematically Underestimated in Sub-Saharan Africa ? A Proposal toOvercome the Problem," Policy Research Working Paper Series 10058, The World Bank.
    7. Zhang, Chen & Yu, Yangcheng & Li, Qinghai, 2023. "Top incomes and income polarisation in China," China Economic Review, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Polarization; Political economy of the US; Relative distribution tools; Middle class; Inequalities; Growth effect; Distribution effect;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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