Public debt and the income share of the top 1% in the US, 1960-2019

This study theorizes the relationship between sovereign debt and income inequality and shows that increases in public indebtedness are robustly associated with increases in the income share of the top one percent in the US since the 1960s. First, the paper outlines the mechanisms through which public debt is linked to the top one percent income share, via interest payments and capital gains from bond trading. Subsequently, it scrutinizes the evolution of public debt and the income share of the top one percent in the US, in parallel with the historical development of political and economic institutions. Building on the historical analysis, it demonstrates econometrically that interest payments and total returns on domestic and foreign public debt are positively associated with the income share of the top one percent in the US for the period 1960 to 2019.