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The growth of US top income inequality: A hierarchical redistribution hypothesis

Blair Fix

No 2018/05, Working Papers on Capital as Power from Capital As Power - Toward a New Cosmology of Capitalism

Abstract: What accounts for the growth of US top income inequality? This paper proposes a hierarchical redistribution hypothesis. The idea is that US firms have systematically redistributed income to the top of the corporate hierarchy. I test this hypothesis using a large scale hierarchy model of the US private sector. My method is to vary the rate that income scales with hierarchical rank within modeled firms. I find that this model is able to reproduce four intercorrelated US trends: (1) the growth of the top 1% income share; (2) the growth of the CEO pay ratio; (3) the growth of the dividends share of national income; and (4) the "fattening" of the entire income distribution tail. This result supports the hierarchical redistribution hypothesis. It is also consistent with the available empirical evidence on within-firm income redistribution.

Keywords: top income share; inequality; hierarchy; power; functional income distribution; personal income distribution (search for similar items in EconPapers)
JEL-codes: B5 C5 D31 D33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:capwps:201805

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