Shifting Tastes, Advancing Technologies: A New Perspective on Income Inequality

Rising income inequality has been a defining feature of developed economies since the 1980s, with technological change widely cited as a key driver. Yet this narrative overlooks another fundamental transformation: the dramatic evolution in how consumers spend their money. This paper shows that changing consumer demand has played a crucial role in moderating income inequality in the US over the period 1989-2021. Using a novel framework that separates demand