Russel Sage Foundation

The rise in economic inequality over the past decades in both the U.S. and many other developed countries has received considerable attention from policymakers, scholars and the public. Emmanuel Saez and Gabriel Zucman contend that despite this attention, there are three limitations in the measurement of income inequalities. First, there is a large gap between national accounts (which focus on economic aggregates and macro-economic growth) and inequality studies (which focus on distributions using survey and tax data). This makes it difficult to measure the extent to which total economic growth accrues to the bottom or top of the income distribution. It also makes it difficult to measure the extent to which growth is due to changes in the labor and capital shares in national income, and to determine how much is due to changing dispersions of labor earning, capital ownership, and returns to capital.  Second, they note that there is no systematic analysis of government influence on the distribution of income through taxes, transfers and public spending, and how these factors affect inequality and income growth by groups. Finally, inequality series are based on different units which make comparisons across studies difficult (top income shares are estimated by tax units, Census statistics are based on households, and wage inequality statistics are based on individual workers).

Saez and Zucman will address these issues by creating Distributional National Accounts that combine tax, survey, and national accounts data in a comprehensive and consistent manner for the U. S. for the years since 1913. Although previous attempts of this sort have captured about 60% of national income, they seek to capture 100% of national income recorded in the national accounts. They will compute income inequality series on both a pre-tax and post-tax basis, allowing them to produce the first comprehensive series on the impact of government on the distribution of economic resources.