The Deepening Divide Within the Rich as a Key Driver of U.S. Economic Inequality

Hyeongwoo Kim () and Donggyu Sul

No auwp2025-03, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: Using a statistically robust decomposition framework, we assess group-level contributions to overall economic inequality. Applying this approach to comprehensive microdata spanning from 1962 to 2019, we find that the recent surge in U.S. inequality is primarily driven by rising within-group income dispersion among the top decile of earners, rather than by between-group inequality (mean differences) relative to the rest of the population. Specifically, our results indicate that over 87% of post-2000 U.S. pre-tax income inequality can be attributed to income variation within the top 10%, with the top 1% alone accounting for more than 70%. Our post-tax income analysis reveals a similar, though slightly weaker, pattern. A further decomposition by income source underscores the growing importance of within-group labor income dispersion among top earners in driving U.S. economic inequality.

Keywords: Inequality; Generalized Entropy; Within-Group Inequality; Between-Group Inequality; Factor Labor Income (search for similar items in EconPapers)
JEL-codes: C43 D31 E25 (search for similar items in EconPapers)
Date: 2025-07
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