Working Paper: NBER ID: w31366
Authors: Joshua D. Gottlieb; David Hmous; Jeffrey Hicks; Morten G. 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; Spillover Effects; Occupational Inequality
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 |
|---|---|
| Increases in local top income inequality (D31) | Increases in income inequality among physicians, dentists, and real estate agents (D31) |
| Increases in income inequality among widget makers (D31) | Increases in income inequality among physicians, dentists, and real estate agents (D31) |
| Local consumption patterns (D10) | Spillover effects in income inequality among service occupations (F61) |
| Geographic proximity (R12) | Spillover effects in income inequality among service occupations (F61) |
| Occupations that do not meet the model's criteria (e.g., engineers and financial managers) (J44) | No spillover effects (F69) |