A Reappraisal of Trade Deficit and Income Inequality in the United States: 1985-2007

Yan Li, Christopher Thompson


The recent resurgence of income inequality in the United States has spawned a wide-ranging discussion to its causes, which has often focused on America's historically high trade deficit in the past two decades. Our paper revisits this issue by investigating the latest trends in the U.S. income disparity from 1985 to 2007, and systematically examining the factors that might have influenced the income inequality. To better understand income disparity, three different measures are employed: Gini, Theil and Atkinson indices. Results show that, only in the cases of Gini and Atkinson, international trade explains a part of income inequality, but it surely cannot be the whole story. Other factors, such as the net migration rate, the changing role of women, and the sectoral distribution of employment also play important roles in accounting for America's income inequality.

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DOI: http://dx.doi.org/10.5539/ijef.v2n1p29

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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