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Income inequality has risen sharply in the United States over the past generation, reaching levels not seen since before World War II. But while almost two-thirds of Americans agree with the statement that 'income differences in the United States are too large', policies aimed at reducing income differences command relatively little popular support. In most rich countries sizeable majorities 'agree strongly' that the government ought to guarantee each citizen a minimum standard of living. Only one American in four agrees strongly with this proposition. The same pattern holds in Congress, where legislators show little interest in policies aimed at taxing the rich, raising the wages of the poor, taxing inherited wealth, or guaranteeing shelter and health care to all Americans. The first three sections of this paper describe how the distribution of income has changed in the United States since the 1970s, why it changed, and why it is more unequal than the distribution in other rich democracies. We then assess the evidence on whether changes in economic inequality affect four other things that Americans care about - economic growth, equality of opportunity for children, longevity, and the distribution of political influence. Section 4 concludes that inequality probably does not have a consistent effect, either positive or negative, on economic growth in rich democracies. Section 5 shows that college attendance became more related to parental income as economic inequality increased in the United States, but it does not find much evidence that a father's economic status has had more influences on his children's economic prospects in the United States than in other rich countries where incomes were more equal. Section 6 argues that increases in economic inequality probably slow the rate of improvement in longevity, but the effect is very small. Thus, we conclude that rising inequality may have lowered life expectancy, but only by a few months. Section 7 discusses the impact of economic inequality on the distribution of political power, arguing that increases in economic inequality tend to increase the political power of the rich, at least in the United States. We conclude by arguing that since the effects of inequality on economic growth, health, and equality of opportunity are modest and uncertain in rich countries, these countries should decide how much economic inequality they are willing to tolerate largely on the basis of what they think is just.

ABSTRACTThis paper examines the problem of inappropriate comparisons in evaluating social programs and the erroneous policy conclusions which can be derived from such comparisons. The paper examines two cases from the United States of America which fail to meet the criterion that comparison groups (if necessary after statistical adjustment) should be identical in all essential respects except in their exposure to the program. In the first of the two cases, involving the measurement of work-effort reduction in negative income tax (NIT) experiments, the inappropriate comparison was made in conducting a statistical analysis of program effects. In the second case, involving the analysis of changes in housing consumption in a housing allowance experiment, the statistical analysis of program effects appears valid, but the correctly measured program outcomes were themselves inappropriately used by policy-makers in drawing policy inferences. The conclusion draws out major lessons for policy analysis and policy-making.

Designed to reach a wide audience of scholars and policymakers, the Brookings-Wharton Papers on Urban Affairs is an annual series that serves as a forum for cutting-edge, accessible research on urban policy. The editors seek to integrate broader research into the urban policy discussion by bringing urban studies scholars together with economists and researchers studying subjects with important urban implications. In this issue, papers examine a range of issues that are relevant to urban economics: —the effects of job location in an urban area on residential choice patterns —the impact of race, ethnicity, and gender on mortgage lending —the effects of urban characteristics on the development of new patents The volume also contains three papers on urban development outside of the United States: —urban sprawl in Europe —rural-to-urban migration patterns in Brazil —location patterns of industry agglomeration across Japanese cities.