Chapter Learning Objectives

  • Recognize the fundamental properties of the U.S. earnings distribution.
  • Understand how economists measure inequality and what is meant by an increase in inequality.
  • Understand the basic economic principles responsible for the phenomenon of superstars.
  • Recognize the main changes that have occurred in the U.S. earnings distribution over the last 40 years or so—in particular, the striking increase in inequality that has occurred since 1980.
  • Understand the primary features of the supply-demand-institutions (SDI) framework, which is the principal theoretical workhorse that economists use to model changes in inequality.
  • Appreciate that there are a huge number of different factors that are potentially responsible for the shift in the U.S. earnings distribution.