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Income Inequality in the United States, 1913-2002.

THOMAS PIKETTY, EHESS, Paris
EMMANUEL SAEZ, UC Berkeley and NBER
November, 2004.

This paper presents new homogeneous series on top shares of income and
wages from 1913 to 2002 in the United States using individual tax returns data.
Top income and wages shares display a U-shaped pattern over the century. Our
series suggest that the large shocks that capital owners experienced during the
Great Depression and World War II have had a permanent effect on top capital
incomes. We argue that steep progressive income and estate taxation may have
prevented large fortunes from fully recovering from these shocks. Top wage
shares were flat before World War II, dropped precipitously during the war, and
did not start to recover before the late 1960s but are now higher than before
World War II. As a result, the working rich have replaced the rentiers at the top of
the income distribution. We emphasize the role of social norms as a potential
explanation for the pattern of wage shares.