We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method allowing us to disentangle the policy effect from changing market incomes. Over the period 1979-2007, the cumulative policy effect aggravated inequality by increasing the income share of the top...

This paper surveys the rise of income inequality in affluent nations. Social programs are critical to keeping inequality in check, but their sustainability is increasingly threatened. A possible solution is high levels of employment.