The income share of the super-rich in the United States has grown rapidly since the early 1980s after a period of postwar stability. What factors drove this change? In this study, we investigate the institutional, policy, and economic shifts that may explain rising income concentration. We use single-equation error correction models to estimate the long-and shortrun effects of politics, policy, and economic factors on pretax top income shares between 1949 and 2008. We find that the rise of the super-rich is the result of rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets.

Support for this research was provided by the Russell Sage Foundation project 83-13-03. The views expressed herein are those of the authors and do not necessarily reflect the views of the Russell Sage Foundation.

Objective. This study examines the effects of union density and government‐sector employment on earnings inequality in Metropolitan Statistical Areas (MSAs) in the United States. Methods. Data on 167 MSAs from the 2000 Census are analyzed using standard regression techniques. Four measures of Atkinson's index (e=0.5, 1.0, 2.0, 3.0) are used as the measure of earnings inequality for full‐time, year‐round workers. Results. MSAs with greater union density and greater government‐sector employment have lower earnings inequality. The progressive effect of union density is strongest for earners in the middle of the distribution and less beneficial for workers at the bottom of the distribution. Government employment is generally associated with lower levels of earnings inequality, but state and federal government employment have the strongest effects. Conclusion. Even in the late 1990s, unions and government‐sector employment remain effective at reducing earnings inequality.