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Evidence on Income Inequality in the United States, 1866–1965

Published online by Cambridge University Press:  03 February 2011

Lee C. Soltow
Lee C. Soltow
Affiliation:
Ohio University
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Extract

It is commonly thought that income distribution among people became more concentrated after the Civil War and that this direction continued until the turn of the century. We can look methodically at the income tax distributions from the Civil War period and compare them directly with the distributions arising from the income tax after 1912. We also have some data from the abortive income tax of 1894. After examining the various blocks of evidence, the conclusion will be made that inequality among upper-income groups did not increase during this period. It is necessary to emphasize that the present investigation is one of income and not of wealth. It might have been possible for the nonhuman wealth distribution among people to remain constant or to increase in inequality while the personal income distribution was decreasing in inequality.

Type
Notes
Information
The Journal of Economic History , Volume 29 , Issue 2 , June 1969 , pp. 279 - 286
Copyright
Copyright © The Economic History Association 1969

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References

1 A more detailed statement is given in Soltow, Lee, “Long-Run Changes in British Income Inequality,” Economic History Review (Apr. 1968).Google Scholar

2 A preliminary random sample has been taken by the author of the individual wealth declarations of adult males 20 years old and over as enumerated in the Census of 1870. A sample of size 3,973 shows the values of 602 individuals to be above $4,000. These conform approximately to a Pareto form with the results: log X = 31167 - 0.6712 log Nx; N = 9; $4,000 = X = $100,000; X = $1,308 Nx -0.6712 and

= $3,980. If the curve above $4,000 is extrapolated to include all males 20 and older, the implicit wealth mean is $3,980. Let us divide the implicit income mean of Table 1 of $242 by our wealth mean of $3.980. This ratio is $242/$3,980 = 0.0608. Persons certainly gave values making income and wealth consistent! Note that wealth inequality is about the same as income inequality. The rates of return on railroad bond yields were 7.92 and 7.78 percent in 1870 and 1871. Stock yields were 5.25 percent in 1871. See Historical Statistics of the United States Colonial Times to 1957 (2d printing; Washington: U.S. Bureau of the Census, 1961), Series X 332, 335.Google Scholar The implicit lower wealth limit of $1,300 is suggestive in terms of 1860 slave prices.

3 Report of the Commissioner of Internal Revenue, Annual Report of 1870, p. xiii.

4 Kuznets, Simon, Economic Growth and Structure (1st ed.; New York: W. W. Norton, 1965), p. 305.Google Scholar