Behind rising inequality and falling growth

Jangyoun Lee

Journal of Macroeconomics, 2021, vol. 70, issue C

Abstract: This paper investigates why the upsurge of top income shares has coincided with economic slowdowns in the US since the late 1970s. I argue that a fast-growing unearned income from ‘wealth residual’ – the unexplained increase in wealth that is not accompanied by any increase in real output – lies behind them. To support this hypothesis, I measure wealth residual from the national accounts and associated statistics, and then perform a set of panel regressions using a comprehensive panel dataset of the US at the state level. The estimation results demonstrate that the rapid growth of wealth residual during the last four decades has contributed to a co-evolution of fast-growing inequality and falling growth.

Keywords: Wealth residual; Top income inequality; Sluggish growth (search for similar items in EconPapers)
JEL-codes: C33 D31 O43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:70:y:2021:i:c:s0164070421000707

DOI: 10.1016/j.jmacro.2021.103371

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