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

Francesco Schettino () and Haider Khan ()

Structural Change and Economic Dynamics, 2020, vol. 53, issue C, 149-161

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.

Keywords: Polarization; Political economy of the US; Relative distribution tools; Middle class; Inequalities; Growth effect; Distribution effect (search for similar items in EconPapers)
JEL-codes: D31 D63 O15 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.strueco.2019.12.003

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Handle: RePEc:eee:streco:v:53:y:2020:i:c:p:149-161