Book Description

This dissertation considers several aspects of the distribution of income and income inequality. It does so by improving estimates of inequality between demographic groups, analyzing factors contributing to US income inequality trends, and estimating the impact of income on health outcomes for individuals in the lower tail of the income distribution. Most empirical studies of earnings and income inequality across demographic groups are based on data from the public use March CPS. However, censoring of high incomes in this data prevent researchers from observing the full distribution. The first essay uses internal CPS data to illustrate how topcoding results in the understatement of income and earnings gaps between men and women, Blacks and Whites, and people with and without disabilities. It also demonstrates how a new series of mean incomes for topcoded observations can be used in conjunction with public use CPS data to closely approximate these internal results. The second essay considers the factors accounting for trends in household income inequality. Using a shift-share approach, this essay analyzes whether income inequality shifts are accounted for by male and female earnings distribution changes or by changing household characteristics. It illustrates that the factors contributing to the rapid rise in household income inequality in the 1970s and 1980s differ substantially from those contributing to slower increases in the 1990s. In contrast to findings for the 1970s and 1980s, in more recent years increases in male earnings inequality largely account for household income inequality trends while declines in the correlation of spouses' earnings have mitigated household income inequality growth. The final essay shifts from considering income inequality to the impact that income has on the health of low income individuals. Health economists have long observed a positive relationship between health and income but the reason for this relationship is unclear. Using exogenous variation in income from state-level differences in the Earned Income Tax Credit, it observes the impact on morbidity of an exogenous increase in income for low income individuals. The results find only weak evidence that the increases in income result in improvements in self-reported health status or the prevalence of functional limitations.