When did inequality rise in Britain and America?

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Abstract

New information and new perspectives reveal three long periods in which the two most-studied economies had a widening in income and wealth gaps. First, income inequality rose in both Britain and America between 1977 and 1995. In America, it regained the old pre-1929 levels, contrary to the official figures. Second, wealth and earnings gaps widened sometime in America between 1774 and 1913. Third, inequality rose in Britain from 1740 to 1810, earlier than others have suspected. This early widening reflects the role of severe relative price movements, which have been missed by the usual measures of (nominal) income inequality.

Section snippets

Seeking a friendly divorce

To prepare the way for a richer understanding of early modern inequality movements, we must first divorce ourselves from the Kuznets curve, both because it is too restrictive and because Kuznets would have wanted us to abandon it, given what we now know.

We have great reason to want the new freedom. The problem is not that the Kuznets' curve has been refuted. The verdict is in fact mixed: Some countries, like Britain and America, seem to pass through a rise-and-fall pattern of inequality as they

Present trends invite a new search for rising-inequality episodes

The last 20 years offer another reason to start looking for a richer history of episodes, rather than a single inverted-U curve. In the U.S. and Britain, income inequality has clearly been rising since about 1977, reversing a large part of the income leveling achieved earlier in this century. In fact, the recent rise in inequality may have been even greater than the official data have revealed.

The usual data suggest that the recent rise of inequality has been more pronounced in Britain than in

When did the Americans first become so unequal?

Here, the debate continues. There is even a debate over whether American inequality ever rose.

The estimates disagree

When was it that income inequality actually rose in Britain? Scholars seeking numbers have had to be content with five kinds of trend measures:

  • 1.

    the inequality of housing consumption, from house-tax data;

  • 2.

    the inequality of labor earnings;

  • 3.

    wealth inequality, an indirect measure of the inequality of property incomes;

  • 4.

    direct estimates of income inequality, derived from early tax returns and from those social tables of Gregory King et al.; and

  • 5.

    crude movements in land rents versus wage rates.

The five

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