Changes in the Level and Distribution of Income in Michigan, 1976–2013, with Comparisons to Other States

Abstract

ABSTRACT We study the changes in the distribution of household income in Michigan from 1976 to 2013, with comparisons to the other 49 states and the District of Columbia. In Michigan, the gap between the 90th and the 50th percentiles increased substantially, but the gap between the 50th and the 10th percentiles decreased slightly. Thus in Michigan (and in most other jurisdictions), the increases in overall inequality were dominated by changes in the upper half of the income distribution. If we include in-kind transfer payments in the income definition, our measures of income inequality are reduced, typically by from five to fifteen percent. The income of the median black household increased very slightly compared to median white household income, but the rate of increase was much less than that of the US as a whole. Panel regression analysis for the 50 states and DC indicates that an increase in high school graduates as a percent of the population is associated with a decrease in income inequality, while an increase in the percentage with education beyond a Bachelor's degree is associated with an increase in inequality. An increase in the unemployment rate tends to be associated with an increase in inequality. An increase in the percent of income from transfer payments tends to be associated with a reduction in income inequality, as does an increase in the percentage of the jurisdiction's economy in manufacturing.