Inequality and institutions in 20th century America PDF
Preview Inequality and institutions in 20th century America
Digitized by the Internet Archive in 2011 with funding from Boston Library Consortium IVIember Libraries http://www.archive.org/details/inequalityinstitOOIevy OBfmY Massachusetts Institute of Technology Departnnent of Econonnics Working Paper Series Inequality and Institutions in 20th Century America Frank Levy Peter Temin Working Paper 07-1 7 May 2007 1 , Room E52-251 50 Memorial Drive MA Cambridge, 021 42 Thispapercanbe downloaded without charge fromthe Social ScienceResearchNetworkPaperCollection at littp://ssrii.com/abstract=984330 Inequality and Institutions in 20th Century America Frank Levy and Peter Temin^ MIT Department ofUrban Studies and Planning and Department ofEconomics, MIT. E-Mail: [email protected] [email protected] We thankNirupama Rao and Julia Dennett for excellent . . research assistance and the Russell Sage and Alfred P. Sloan Foundations for financial support. We have benefited from helpfiil comments from Elizabeth Ananat, David Autor, Jared Bernstein, Barry Bosworth, Peter Diamond, John Paul Ferguson, Carola Frydman, Robert Gordon, Harry Katz, Larry Katz, Tom Kochan, Richard Mumane, Paul Osterman, Steven Pearlstein, Michael Piore, Dani Rodrik, Emmanuel Saez, Dan Sichel, Robert Solow, Katherine Swartz, Eric Waimer and David Wessel and from seminarparticipants atNBER andthe Sloan School Institute for Work and Employment Research. Inequality and Institutions in 20th Century America Abstract We provide a comprehensive view ofwidening income inequality in the United We States contrasting conditions since 1980 with those in earlier postwar years. argue that the income distribution in each period was strongly shaped by a set ofeconomic institutions. The early postwar years were dominated by unions, a negotiating framework set in the Treaty ofDetroit, progressive taxes, and a high minimum wage - all parts ofa general government effort to broadly distribute the gains from growth. More recent years have been characterized by reversals in all these dimensions in an institutional pattern known as the Washington Consensus. Other explanations for income disparities including skill-biased technical change and international trade are seen as factors operating within this broader institutional story. Key words: Income inequality. Institutions, Treaty ofDetroit, Washington Consensus JEL Codes: J31,J53,N32
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