An Empirical Test of the Institutionalist View on Income Inequality: Economic Growth within the United States

By Rodriguez, Carolyn B. | The American Journal of Economics and Sociology, April 2000 | Go to article overview

An Empirical Test of the Institutionalist View on Income Inequality: Economic Growth within the United States


Rodriguez, Carolyn B., The American Journal of Economics and Sociology


CAROLYN B. RODRIGUEZ [*]

ABSTRACT. This paper analyzes the relationship between income inequality and economic growth within the United States using state level data. It describes income inequality in the U.S. since 1960, then employs a two-step causal model to test the institutionalist contention that income inequality leads to socio-political instability, which has a negative impact on economic progress. The empirical results offer support for the institutionalist view.

I

Introduction

EMPIRICAL WORK INVESTIGATING THE HYPOTHESIS that increases in income inequality leads to reduced economic growth has almost exclusively been performed using nations as the unit of analysis. At the same time, empirical examinations of the effects of increasing income inequality on economic growth at the sub national level are sparse. James T. Peach (1987) called for more empirical studies addressing the relationship between income distribution and economic growth within the institutionalist framework, noting "since institutionalism is a 'fact-based' theory, more such studies should be encouraged". [1] He also questioned the use of national level data as the unit of analysis, particularly for large nations, citing that "regional differences in inequality are often hidden." [2] This paper responds to his suggestions by offering a description of income inequality at the state level since 1960 and empirical testing of the institutionalist view of the negative consequences of income inequality on economic growth.

The first section of this study summarizes work describing patterns of income inequality growth within the United States from 1960 to the mid-1990s. The second section examines the institutionalist theory of income distribution with particular focus on its effect on economic progress. The third section provides an empirical test of the effect of increased income inequality on economic progress using an institutionalist model constructed by Kang H. Park (1996).

II

The Growth of Income Inequality within the United States

DATA PROVIDED FOR THE U.S. show that the lowest twenty percent of families are sharing a smaller and smaller percentage of the total family income pie, while the richest fifth's share is growing, particularly since the late 1980s [3] (Weinberg, 1996). This may still leave some to ponder which states are experiencing the largest growth in income inequality. Partridge, Partridge, and Rickman (1998) examined the increases in family income inequality in the 48 contiguous states from 1960 to 1990 using the Gini coefficient and U.S. Census data. In general they found that family income inequality fell through the 1960s, increased steadily in the 1970s, then grew sharply after 1980. [4] New England, Pacific states, and some western states had the lowest income inequality in 1960, while the South Atlantic and South Central states had the highest. By 1970, the regional patterns shifted. The South Atlantic, East South Central, and West South Central states had the lowest income inequality, while the Northeast, Western, Mountain, and East North Central states had the most. This pattern continued through 1990.

While the work by Partridge, Partridge, and Rickman sheds light on regional differences in income inequality within the U.S., it does not actually show that the poor are getting poorer, while the rich are getting richer. Larin and McNichol (1997) find that, between 1978 and 1996, 48 states experienced increased income inequality. Using pooled time series data on families with children for the periods of 1978-80 and 1994-96, they show that in 44 states the bottom fifth of families grew poorer while the top fifth grew richer. In ten of these states the average income of the bottom quintile of the income distribution dropped by more than 30%. [5] By contrast, in 31 states the top quintile experienced average family income gains over 20%.

Average incomes did not fall in every state, however. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

An Empirical Test of the Institutionalist View on Income Inequality: Economic Growth within the United States
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.