Working Paper: CEPR ID: DP18212
Authors: Joshua Gottlieb; David Hemous; Jeffrey Hicks; Morten Olsen
Abstract: Top income inequality in the United States has increased considerably within occupations. This phenomenon has led to a search for a common explanation. We instead develop a theory where increases in income inequality originating within a few occupations can “spill over” through consumption into others. We show theoretically that such spillovers occur when an occupation provides non-divisible services to consumers, with physicians our prime example. Examining local income inequality across U.S. regions, the data suggest that such spillovers exist for physicians, dentists, and real estate agents. Estimated spillovers for other occupations are consistent with the predictions of our theory.
Keywords: income inequality; assignment model; occupational inequality; superstars
JEL Codes: D31; J24; J31; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in top income inequality among widget makers (D31) | increase in top income inequality among physicians (D31) |
| increase in top income inequality among widget makers (D31) | increase in top income inequality among dentists (D31) |
| increase in top income inequality among widget makers (D31) | increase in top income inequality among real estate agents (L85) |
| increase in top income inequality among local population (D31) | increase in top income inequality among specified occupations (D31) |