Aug

8

The Gini  ratio is a commonly used measure of income inequality. Historical GINI data by year is available here.

Higher GINI ratio is greater inequality, and has been widely discussed GINI has risen 1948-2010. This data was used to calculate year-to-year change in GINI, and yearly rate of change was partitioned by presidential party: Democrat (1) and Republican (2). Mean GINI yearly rate of change for the two presidential political parties was compared:

Two-Sample T-Test and CI: yr change GINI, D(1) VS R(2)

Two-sample T for yr change GINI

D(1)
VS
R(2)  N    Mean   StDev  SE Mean
1     27  0.0012  0.0206   0.0040   T=-0.58
2     36  0.0038  0.0135   0.0023

The mean yearly rate of change in GINI for both parties was positive (income inequality increasing). Though during Republican administrations the rate increased about three times faster than during Democrats, the difference was not significant (there is no statistical difference in the rate of increase in GINI).

The attached plots yearly change in GINI vs year. One notes the dispersion in yearly GINI change was much higher pre-1980. A possible explanation for this would be changes in the US central bank's approach to the business cycle ("the great moderation")

 

David Lilienfeld writes: 

I have a different take. Prior to 1980, it looks like there is a pretty clear positive slope, whereas after that the line is pretty flat. That strikes me as counter-intuitive.

Ron Schoenberg writes: 

I would like to see an analysis based on wealth rather than income which I believe would show a significantly greater inequality. Also, the data referred to below apparently doesn't include capital gains. I believe the results are understating true inequality. 

Rocky Humbert wonders:

And how does Ron propose to apportion the so-called wealthy people's share of Federal, State and Local debt? Of the trillions of unfunded liabilities through out the public sector?) Does he propose to allocate it based on "wealth" or per capita? And if he apportions it per capita, how does it deal with the fact that per household debt cannot possibly be serviced by per household income.

It's all reminiscent to the way that a couple going through a contentious divorce to do it: The wife says: "I'll keep the house." Husband: "Ok."Wife: "And I'll keep the dog." Husband: "Ok." Wife: "But you take the debt." Husband: "But, but…."


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