Earnings Inequality and Mobility in the United States, 1937-2004: Evidence from Social Security Administration Data

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Proposal No: 0617737 Institution: NBER NSF Program: ECONOMICS Principal Investigator: Saez, Emmanuel Title: Earnings Inequality and Mobility in the United States, 1937-2004: Evidence from Social Security Administration Data ABSTRACTThe sources and consequences of income inequality has been of great concern for economists, labor unions, political parties, and policy makers alike. Yet most of the work on income inequality has either focused on cross section data or very short time series data, thus not being able to provide a long term view of how inequality affects mobility. This proposed research will investigate the evolution of earnings inequality and mobility in the United States since 1937 using a large longitudinal data from the Social Security Administration. The study will also study how income mobility affects changes in income inequality in the United States since 1937 as well as account for the factors the affect mobility and the inequality of earnings. The large sample will allow the PI to test whether structural mobility models that have been used extensively with smaller datasets are well specified. Finally, the data will be used to cast light on the mechanisms behind the surge in top wage incomes that has been observed after the large tax rate cut on high earnings of 1986. This research will create a new series of summary measures of earnings mobility and inequality in the United States for the period 1937-2004, decomposed by age, gender, and ethnic origin. The Social Security Administration earnings data is much larger and accurate than any existing survey data to estimate such series, and have never been used to produce such systematic series. The series of summary measures created will be made publicly available to other researchers, after the Social Security Administration clears it of the necessary confidentiality review. The availability of such homogeneous data will allow not only researchers but also policy makers, the press, and the broader public to discuss and comment on issues of earnings inequality and mobility over time, across gender and ethnic origin lines. This research will therefore have important policy applications.