As income inequality in the United States has soared and median wages have flatlined since 1980, economists have spent a lot of time debating why the top 1 percent have done so much better than everyone else. Is policy to blame? The decline of labor? Technology?

Everyone’s trying to keep up with this. (Getty)

An equally pressing question, though, is what those increasingly hefty incomes at the very top mean for the lives of everyone else. And a big, newly revised paper (pdf) by the University of Chicago’s Marianne Bertrand and Adair Morse finds that there is a connection, but not a happy one: The gains of the rich have come alongside losses for the middle class.


3 thoughts on “‘Trickle-down consumption’: How rising inequality can leave everyone worse off

  1. When it comes time for the middle class to pay the piper things are going to get bad. IF the middle class tightens it’s belt then consumption goes down. That will bring down corporate profits and stunt growth. The simple fact is that companies can’t continue to make larger and larger profits if the populace they make money from is only able to spend the same amount year after year.


  2. I am reading the original paper by Bertrand and Morse right now. An interesting thing I cam across is that when income is controlled for age, race, gender, marital status, # of children in household and # of adults in household at the household level there is no correlation between income increases of the wealth and the middle class. That means increased income of the wealthy does NOT impact the income of the middle. This is clear evidence based on 27 years of income data that trickle down economics simple is not occurring.


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