Hollowing Out: The Channels of Income Polarization in the United States
IMF Working Papers, November 15, 2017
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Bibliographic details
- Authors: Ali Alichi, Rodrigo Mariscal, Daniela Muhaj
- Published: November 15, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484328293.001
Summary and scope
- Paper title: Hollowing Out: The Channels of Income Polarization in the United States
- Authors: Ali Alichi, Rodrigo Mariscal, Daniela Muhaj
- Date: November 15, 2017
- Publication: IMF Working Papers, Working Paper No. 2017/244, Issue 244, Volume 2017, Pages: 66
- DOI: https://doi.org/10.5089/9781484328293.001
- ISBN: 9781484328293
- ISSN: 1018-5941
- Subject tags: Education, Income distribution, Income inequality, National accounts, Personal income, Population and demographics
- Keywords: Global, Hollowing Out, Hollowing-out index, household population, households decrease, income data, Income distribution, Income inequality, income polarization, Inequality, Middle Class, Middle-Income Class, Personal income, population share, WP
Key findings
- Middle-income households have continued moving down, and less so up, the income distribution in the United States since the 1970s — described as polarization or “hollowing out” of the income distribution.
- The level of income polarization is generally lower in the richer states (i.e., those with higher median household income levels).
- There have been wide variations in changes in income polarization over time across states.
- The paper develops two indices to measure income polarization, including a novel hollowing-out index.
- Econometric analysis is conducted at both state and household levels.
Drivers and proximate causes (empirical results)
- Technology, measured by job routinization, and international trade, measured by job offshoring, can fully explain the non-trend rise in income polarization, with broadly equal contributions.
- Household characteristics — including age, education, race, and gender — have been important drivers but with a net countervailing effect on income polarization.
- The net countervailing effect is mainly thanks to the rising education level of households, which has led to better incomes.
Contributions and methodological notes
- Introduces a novel hollowing-out index alongside a second polarization index to quantify movements in the income distribution.
- Provides an examination of proximate causes of income polarization using econometric analysis at two levels: state-level and household-level.
Implications (inferred emphasis from results)
- Structural forces linked to labor market tasks (routinization) and exposure to international trade (offshoring) are central to explaining increases in income polarization.
- Human capital improvements (rising education levels) have mitigated income polarization at the household level, generating a net countervailing effect.
Source: IMF Working Paper No. 2017/244, "Hollowing Out: The Channels of Income Polarization in the United States" by Ali Alichi, Rodrigo Mariscal, and Daniela Muhaj, November 15, 2017. DOI: https://doi.org/10.5089/9781484328293.001
Content in this bundle
- Hollowing Out: The Channels of Income Polarization in the United States, WP/17/244, November 2017