TRENDS IN US INCOME INEQUALITY - EVIDENCE FROM A PANEL OF STATES

Many studies have attempted to explain the sharp increase in U.S. inco me inequality. These studies typically used time series data of the U. S. or compared the trends in the U.S. with those in other countries. W e employ panel data from 1960-1990 for the 48 contiguous states to exa mine trends in U.S. income inequality. Advantages of our panel data se t include the addition of a large number of sufficiently similar cross -sectional units and extension of the period of analysis to before the increase in U.S. income inequality. Based on state fixed effect estim ates, we find that greater international migration, greater metropolit an shares of population, and increased percent of households headed by females increase income inequality while greater participation rates decrease income inequality. Also, advanced stages of economic developm ent may increase income inequality. Other factors such as unionization did not affect state income inequality.