Inequality and Growth in the United States: Evidence From a New State‐level Panel of Income Inequality Measures

This paper introduces a new comprehensive panel of annual state‐level income inequality measures spanning the postwar period 1945–2004. For many states, the share of income held by the top decile experienced a prolonged period of stability after World War II, followed by a substantial increase in inequality during the 1980s and 1990s. This paper also presents an examination of the long‐run relationship between income inequality and economic growth. Our findings indicate that the long‐run relationship between inequality and growth is positive in nature and driven principally by the concentration of income in the upper end of the income distribution. ( JEL D31, O40)