Abstract
This paper calculates the distribution of an adjusted measure of income that deducts damages due to exposure to air pollution from reported market income in the United States from 2011 to 2014. The Gini coefficient for this measure of adjusted income is 0.682 in 2011, as compared to 0.482 for market income. By 2014, we estimate that the Gini for adjusted income fell to 0.646, while the market income Gini did not appreciably change. The inclusion of air pollution damage acts like a regressive tax: with air pollution, the bottom 20% of households lose roughly 10% of the share of income, while the top 20% of households gain 10%. We find that, unlike the case for market income, New England is not the most unequal division with respect to adjusted income. Further, the difference between adjusted income for white and Hispanics is smaller than expected. However, the gap in augmented income between whites and African-Americans is widening.
Highlights
In order to bolster our use of the top-coded market income data, we estimate a Gini coefficient for household income using all 1.2 million households in the Integrated Public Use Microdata Series (IPUMS) database for 2011
The distribution of income is worse than you think earlier literature [3,13] to make, essentially, two new points: (1) adjusted income of this sort is more unequal than reported market income, and (2) adjusted income is becoming less unequal over time
The spatial pattern of inequality in adjusted income differs from that of market income; states in the colloquial heartland exhibit very high degrees of adjusted income inequality whereas states in the urban northeast tend to show the highest extent of market income inequality
Summary
“It has been argued, for example, that if we measured income more comprehensively than we do, or if we measured it over periods longer than a year, a clearer trend toward equality would emerge.”. This specification of adjusted income is based on principles guiding the incorporation of environmental externality into measures of national income found in a longstanding literature consisting of both theoretical proposals and some examples of execution [6,13,14,15, 16,17] Despite these earlier works, we are the first to link individual and household damage to market income and to construct the distribution of this measure of adjusted income. The use of environmental assets and services is, with household production and investments in health and human capital, a first order priority for those committed to the development of augmented accounts [16, 17] and, within this class, the effects of PM2.5 and O3 represent a substantial and practical choice It is no more than a first step, : it would be interesting to ask, for example, how the distribution of “full income” looks when, say, the costs of ground water pollution are included. Because cross-sectional price variation may reflect spatial differences in public good provision, we use cost-of-living adjusted (COLA) incomes, but note that the COLA adjustment is even higher in high-damage communities
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