Monday, June 6, 2011

Graphic Evidence of Increasing Inequality and Social Stratification in the US

The Stanford Center for the Study of Poverty and Inequality (here) has published a set of 20 graphs (with explanations) demonstrating rising inequality in the American economy. Here's one example showing that the an increasing share of the social wealth is held by the top 10%, while the share held by the bottom 60% is declining.
















Even more troubling than increasing  income and wealth disparities is the social stratification that seems to be accompanying it. A recent study sponsored by the Pew Charitable Trusts, in association with scholars from the Heritage Foundation, American Enterprise Institute, Brookings Institution and the Urban Institute, associates rising income inequality with increasing class stratification and reduced socio-economic mobillity. According to that study, social mobility in the US - home of the "American Dream" - is now lower than in several other countries, including France, which was dominated by an aristocracy for hundreds of years.


















I am particularly interested to understand how changes in legal institutions may be influencing the decline in social mobility in the US. It seems likely that the demise of the estate tax (see, e.g., here) and the rise of dynastic trusts (see, e.g., here) have played some role. However, such changes in legal institutions may be symptoms as well as causes of increasing social stratification, as the wealthy pressure state legislatures and Congress to enact legislation protecting their wealth against intra- and inter-generational transfers.

Theories of public choice and collective action certainly explain why the top 10% has successfully pursued legal institutions that protect their wealth. They also explain why it could become increasing difficult for the bottom 60% (or even the bottom 90%) to successfully oppose those efforts as income disparities continue to rise.

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