Using Relative Distribution Methods to Study Economic Polarization Across Categories and Contexts

Area of Science:

• Economics
• Sociology
• Quantitative Social Science

Background:

• Growing attention on the distributional shape of economic status beyond overall dispersion.
• Economic polarization defined as a shrinking middle with growing extremes, having unique social consequences.

Purpose of the Study:

• Develop an individual-level approach for analyzing economic polarization.
• Disentangle sources of polarization: compositional change versus relative economic status change.
• Examine heterogeneity in economic polarization across various groups and units.

Main Methods:

• Building on relative distribution methods and job polarization literature.
• Individual-level analysis of economic polarization.
• Distinguishing between changes in worker allocation (compositional) and reward allocation (relative status).

Main Results:

• The developed approach offers flexible measurement of economic polarization (between and within categories).
• The method successfully disentangles compositional and relative economic status changes.
• Empirical applications demonstrate analysis of wage and income polarization trends and variations.

Conclusions:

• The novel approach provides a robust framework for studying economic polarization.
• Understanding the drivers and heterogeneity of polarization is crucial for policy.
• Further research can apply this method to diverse socioeconomic contexts.