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UK top income shares have varied hugely over the past two centuries, ranging from more than 30% to less than 7% of pre‐tax national income allocated to the top 1 percentile. We build a congruent dynamic linear regression model of the top 1% income share allowing for economic, political and social factors. Saturation estimation is used to model outliers and trend breaks, proxying underlying structural changes driving income inequality in the UK. We use the model to forecast the top 1% income share over the last 15 years, and compare to a range of forecast devices. Despite a well‐specified constant parameter model conditioning on significant explanatory variables, the best performing forecasts are obtained from a random walk and a smoothed random walk. These results are explained by the presence of shifts in the income share over the forecast period, resulting in forecasts from equilibrium correction models converging to the wrong equilibrium. Our best prediction for 2026 based on the most recent data from 2021 (a 5‐year ahead projection) is that the pre‐tax top 1% income share will remain at the most recent realized value of 12.7%, but there is a large degree of uncertainty, with a 95% confidence band ranging from 10% to 15.7%. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. David Forbes Hendry received his MSc and PhD from the LSE. [ABSTRACT FROM AUTHOR]

Information on both wages and job quality is needed in order to understand the occupational dispersion of wellbeing. We analyse subjective wellbeing in a large UK sample to construct a measure of 'overall reward', the sum of wages and the value of job quality, in 90 different occupations. If only wages are included, then labour market inequality is underestimated: the dispersion of overall rewards is one‐third larger than the dispersion of wages. Our findings are similar, and stronger, in data on US workers. We find a positive correlation between job quality and wages in all specifications, both between individuals in the cross‐section and within individuals in panel data. The gender and ethnic gaps in the labour market are larger than those in wages alone, and the overall rewards to education on the labour market are underestimated by earnings differentials alone. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Maria Cotofan is a research Associate at the CEP. Andrew E. Clark obtained his mSc and PhD from the LSE and is a research Associate at the CEP. Richard layard is the Founder‐Director at the CEP and is the co‐Director of the Centre's programme on Community Wellbeing. [ABSTRACT FROM AUTHOR]

If large firms employ relatively more educated workers, will an increase in market concentration increase income inequality by raising the relative demand for skill? I use Swedish employer–employee data from 1997–2016 and find a strong correlation between firm size and the share of college‐educated ('skilled') workers. An increase in a sector's market concentration is correlated with a higher skilled wage premium and higher relative employment of skilled workers. This is due mainly to the reallocation of workers across firms. I demonstrate how these findings can be explained by a model of heterogeneous firms where productivity and skill intensity are positively correlated. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Anders Akerman completed his BSc and MSc at the LSE. [ABSTRACT FROM AUTHOR]

Changes in the structure of work and families over the last four decades have increased many labour market inequalities. Growing earnings inequality, adverse labour market 'shocks' for the low‐educated, and geographically concentrated pockets of deprivation are among the most evident of these in Britain. The decade since the financial crisis has brought these inequalities into sharper focus, and the Covid‐19 pandemic has further exacerbated labour market inequality. The object of this paper is to highlight the key role played by poor wage progression for lower‐ and middle‐educated workers in understanding inequality in the labour market and for designing effective policy responses. It is unlikely that we can address all the concerns about low wages, wage progression and earnings inequality through the tax and welfare system alone. The challenge is how best to balance tax and welfare benefit policy with other policies, such as human capital policies, the minimum wage and labour market regulation. The results point to a mix of policies that aim to enhance wage progression for the lower‐educated within a welfare system that supports low‐earning families and provides a minimum wage floor for hourly wages. [ABSTRACT FROM AUTHOR]

This paper examines the impact of oil price and quantity shocks on income inequality in the USA. Using micro income data, we construct measures of pre‐tax money income inequality at the state level for the period 1980–2017. We find that a $10 increase in oil price increases inequality, measured by the ratio of pre‐tax income of the 90th percentile to 10th percentile (p90/p10), by 3.8 percentage points in states with high levels of oil endowments per capita. The increase in capital income to households at the top of the distribution drives the observed change in inequality. In addition to price shocks, we study the impact of quantity shocks that arise from oil discoveries. Quantity shocks have no effect on the overall income distribution. [ABSTRACT FROM AUTHOR]

This paper assesses the causal impact of the European Union (EU) cohesion policy, aimed at reducing the regional divide within the EU, on interpersonal income inequality in receiving areas. We leverage a severe contraction of financing, which took place in an Italian region in 2007, and adopt a difference‐in‐discontinuity empirical design to show that the Gini index (of income) at the municipality level goes down because of the end of the policy. The improvement is due to the move of top earners towards the centre of the distribution. The reduction in the Gini indicator is confirmed even if we resort to a region‐level analysis. Our results suggest that from a policy perspective, reducing spatial inequality might come with the cost of worsening inequality across individuals. [ABSTRACT FROM AUTHOR]

By exploiting large‐scale administrative data on income and estimated personal wealth in Norway from 2010 to 2018, this paper establishes the first micro‐level analysis of the difference between the real return on wealth and the real growth rate of total pre‐tax income, across the entire net wealth distribution. We show that for the top 40% of the distribution, the aggregate R−G$$ R-G $$ of 1.8% underestimates its micro counterpart r−g$$ r-g $$, while the opposite happens for the bottom 60%. Moreover, for the bottom 50% of the net wealth distribution, it is indeed the case that r

Studies for high‐income countries have shown that the prescription that a man should earn more than his wife holds back women's performance in the labour market, evidencing the importance of gender identity norms in explaining persistent gender gaps. Using data on couples in Uruguay for the period 1986–2016, this paper analyses behavioural responses to the male breadwinner norm, investigating the role of job informality as an additional mechanism of response to gender norms. My results show that the higher the probability that the wife earns more than her husband, the less likely she is to engage in a formal job, providing evidence that gender norms affect not only the quantity of labour supply (i.e. labour force participation and hours of work), but also the quality of jobs in which women are employed. Moreover, I also identify meaningful effects of the norm on men: those with lower potential earnings than their wives react to the norm by self‐selecting into better‐paid formal jobs. Not considering these effects would lead to underestimating the consequences of gender norms on labour market inequalities in the context of developing countries. [ABSTRACT FROM AUTHOR]

This study develops a general equilibrium model in which the evolution of income inequality and output conforms with the Kuznets hypothesis. The paper presents a novel endogenous mechanism that generates the inverted-U relation between income inequality and per capita output, and captures the reciprocal influence between the two. Unlike previous attempts for a comprehensive theoretical modeling of this phenomenon, the evolution of the economy is consistent with another important empirical observation: namely, that output growth is accompanied in the early stages of development by a widening wage differential between skilled and unskilled labour, whereas in a later stage this wage differential declines. [ABSTRACT FROM AUTHOR]

The Pareto distribution has long been a source of fascination to economists, and the Pareto coefficient is widely used, in theoretical and empirical studies, as a summary of the degree of concentration of top incomes. This paper examines the empirical evidence from income tax data concerning top incomes in the UK, contrasting the dramatic changes that took place in the twentieth century, after 1918, with the much more modest changes in the preceding nineteenth century. Probing beneath the surface, the paper identifies a number of features of the evolution of the UK income inequality that warrant closer attention. These include the changing shape of the upper tail, where there is a link with Pareto's theory of elites, the need for a richer functional form to describe top incomes, and the limited evidence at the top of the distribution for a Kuznets curve in nineteenth century Britain. [ABSTRACT FROM AUTHOR]

This paper examines the effect of marital sorting on earnings inequality, taking into account extensive and intensive margin labour supply choices. Using German microdata, the observed distribution of couples' earnings is compared to a counterfactual of random matches. In West Germany, marital sorting is found to be disequalizing only after adjusting for labour supply. This means that positive sorting in earnings potential is veiled by low female participation rates. In East Germany, the impact is highly disequalizing even when earnings are taken as given, due to the fact that East German women are more attached to the labour market. [ABSTRACT FROM AUTHOR]

Some analysts use sequential dominance criteria, and others use equivalence scales in combination with non-sequential dominance tests, to make welfare comparisons of joint distributions of income and needs. In this paper we present a new sequential procedure which copes with situations in which sequential dominance fails. We also demonstrate that the recommendations deriving from the sequential approach are valid for distributions of equivalent income whatever equivalence scale the analyst might adopt. Thus, the paper marries together the sequential and equivalizing approaches, seen as alternatives in much previous literature. All results are specified in forms that allow for demographic differences in the populations being compared. [ABSTRACT FROM AUTHOR]

This paper uses unique primary data on directly elicited individual subjective expectations to analyse and characterize the process that generates the income of poor, rural Indian households. We validate and use responses to subjective expectations questions and a parametric assumption to fit a household-specific probability distribution for future income. Combining computed moments from this distribution with data for actual current income, we specify and estimate a dynamic model of household income. We find that our households face a very persistent income process. Our paper is one of the first that uses subjective expectations data to model income processes. [ABSTRACT FROM AUTHOR]

Even before the financial crisis, many developed economies were facing growing inequality and struggling to maintain employment and earnings. This paper addresses two key questions. What has happened to inequality? Where will tax and welfare reforms have most impact? The UK is used as a running example. The analysis suggests that the pattern of sluggish real wages at the bottom looks set to continue, and longer-term earnings growth will come mainly from high-skilled occupations. Growing earnings inequality will bring increasing pressure on the tax and welfare system. A blueprint for a coherent tax policy reform is presented. [ABSTRACT FROM AUTHOR]

The optimal congestion charge has been the subject of several recent papers appearing in this journal and elsewhere. Oakland (1969, 1972) derives the conditions for the optimal pricing of congested facilities under conditions of unlimited and fixed capacity. He concludes that the optimal congestion charge is equal to the congestion damage accompanying the use of the facility by one more person and that the charge should be uniform over all users. Sandmo (1973, 1974), using a different approach, reaches the same conclusion.
The optimality conditions derived in these studies have normative significance only so long as lump-sum income transfers are available for moving us to the Pareto frontier. The present article begins with the premise that incomes are not justly distributed and that a transfer system that would correct the income distribution is infeasible both from an administrative and from a political point of view. In this situation, the traditional pricing rules for congested facilities must be modified to reflect distributive considerations. It is shown in this paper that the optimal price of a congested facility is not, in general, proportional to marginal cost but must reflect society's evaluation of the worth of an additional dollar to each household. A balance must be achieved between considerations of equity and considerations of efficiency.
The approach of this study was suggested by the works of Diamond and Mirrlees (1971a, b) and Feldstein (1972a, b, c), who derived optimality conditions and pricing rules for the pricing of private goods produced by a central authority constrained to raise a fixed amount of revenue but without the power to redistribute incomes through lump-sum taxes and transfers. The present study extends their work to the situation where the goods in question are subject to crowding and, hence, are of a quasi-public goods nature. (Although Diamond and Mirrlees (1971b, Section IX) discuss the optimal pricing of pure... [ABSTRACT FROM AUTHOR]

In this paper education simultaneously affects growth and income inequality. More education does not necessarily decrease inequality when the latter is assessed by the Lorenz dominance criterion. Increases in education first increase and then decrease growth as well as income inequality, when measured by the Gini coefficient. There is no clear functional relationship between growth and measured income inequality. The model identifies regimes of this relationship that depend crucially on the production and schooling technology. Conventional growth regressions with human capital and inequality as regressors may miss the richness of the underlying nonlinearities, but may still provide important information on the nonlinear relationship between growth and education. [ABSTRACT FROM AUTHOR]

This paper presents a model in which opportunity differences within society result in child labour, where ‘opportunity’ is broadly defined but can include school quality, access to higher paying jobs, access to information about the returns to education and actual discrimination. If opportunity differences exist, child labour and poverty are shown to be symptomatic of this underlying socioeconomic condition. It is then shown that policies that ban child labour and/or introduce compulsory education laws can actually reduce dynastic welfare, increase poverty and further exacerbate income inequality within society, because they treat the symptom rather than the disease: the lack of opportunity. [ABSTRACT FROM AUTHOR]

This paper attempts, for the first time for the UK, to analyse the earnings of homosexuals and test for the possible existence of sexual orientation discrimination by using decomposition analysis. Homosexuals are identified as individuals living with‘same-sex partners’. Gay men and lesbians in our sample both earn more on average than non-gays. However, we find that the decomposition indicates that homosexual men may be subject to discrimination in pay, in the sense that they earn less than heterosexual men with similar characteristics would earn, and therefore they may be more likely to benefit from UK legislation. [ABSTRACT FROM AUTHOR]

We use a simple structural matching model with unobserved heterogeneity to produce counterfactual marriage patterns, and thus quantify the contribution of changes in marital patterns in rising income inequality. We propose an algorithm that allows us to fix the degree of assortative mating without changing the level of marital gains and hence isolate the intensive and extensive margins (i.e. isolate changes in assortative mating from changes in marriage rates). We apply this approach to US data from 1962 to 2017, and show that marital patterns can explain about a quarter of the rise in income inequality, the intensive margin contributing 7%, the extensive margin the remaining 93%. Our algorithm also allows us to show that the extensive margin is itself driven for three‐fifths by a change in the total number of singles and for two‐fifths by a change in the distribution of types among singles (in particular low‐educated women). [ABSTRACT FROM AUTHOR]

This paper studies an economy where parents can choose between public or private schools and can vote on taxes used to fund public schools. The model is calibrated to US data and studied using simulations. A bimodal income distribution emerges where public education students converge to a low-income equilibrium while private education students experience endogenous growth with higher incomes. However, public education students experience long-run growth through a spillover from private education students. Possible problems with the existence of a private alternative to pubic education, such as the emergence of a education-based class structure, are identified. [ABSTRACT FROM AUTHOR]

This paper illustrates how convergence equations can be used to analyse the dynamics of the income distribution using a simple extension of standard techniques. Using data for a sample of OECD countries, I estimate an equation that relates growth in income per capita to the standard growth theory variables, government size and labour market performance indicators. The estimated model and the underlying data are then used in a convergence accounting exercise that yields quantitative estimates of the contribution of each of these variables to the relative growth performance of each country and to observed convergence in the sample. [ABSTRACT FROM AUTHOR]

Standard measures of multidimensional inequality (implicitly) assume common preferences for all individuals, and hence are not sensitive to preference heterogeneity among members of society. In this paper, we measure the inequality of the distribution of equivalent incomes, which is a preference-sensitive multidimensional wellbeing measure. To quantify the contribution of preference heterogeneity to wellbeing inequality, we use a decomposition method that calculates wellbeing inequality in different counterfactual distributions. We focus on four sources of wellbeing inequality: the correlation between outcomes and preferences, the preference heterogeneity, the correlation between the outcome dimensions, and the inequality within each of the outcome dimensions. We find that preference heterogeneity accounts for a considerable part of overall wellbeing inequality in Russia for the period 1995-2005. [ABSTRACT FROM AUTHOR]

We examine the distributional consequences of post‐Brexit trade barriers on wages in the UK. We quantify changes in trade costs across industries, accounting for input–output links across domestic industries and global value chains. We allow for demand substitution by firms and consumers, and worker reallocation across industries. We document the impact at the individual and household level. Blue‐collar workers are the most exposed to negative consequences of higher trade costs, because they are more likely to be employed in industries that face increases in trade costs, and are less likely to have good alternative employment opportunities available in their local labour markets. Overall, new trade costs have a regressive impact, with lower‐paid workers facing higher exposure than higher‐paid workers once we account for the exposure of other household members. [ABSTRACT FROM AUTHOR]

This article presents information on the Luxembourg Income Study (LIS) data in analysing the levels and trends of income inequality in five countries. Inequality increased in Sweden, Great Britain and the United States but did not increase in Canada and the Netherlands. Increased inequality of household head's earnings and increased shares of spouse's earnings in family income account for much of the observed increases in income inequality. The public sector can, in general, be assigned a moderating effect on these changes. Demographic shifts are not assigned any major role in inequality changes. The two distinctive features of this paper are that it examines the trends in inequality in disposable income among the whole population in the five countries using comparable data, and it examines which broad sets of explanations are and which are not compatible with the observations, using a unified framework.

This article presents information on various approaches taken to reveal the composition of social welfare households with different demographic types. The present note is concerned primarily with the underlying methodology. It presents an attempt at differentiating some of the various methods. In order to make their normative content transparent, an axiomatic approach is employed. The proceeding in this paper is a bit indirect. Starting from a rather general form of the social welfare function, several economic principles are imposed. In other words, it characterizes one method of modelling income distributions for heterogeneous populations. Furthermore, some implications of the respective principle are derived, allowing the reader to judge the different methods. The following section in the article presents the framework of the investigation and the methods considered. In Section III an example demonstrates their different implications. Section IV proposes four properties of social welfare functions and examines their implications. Section V discusses the various methods in the light of their consequences and offers some conclusions.

This paper analyses links between rising income inequality, child poverty and one-parent families in the United States from 1971 to 1989. One test reallocated weights so that 1959 proportions of children by mother's marital status resembled the 1971 distribution. A second method used : (1 ) simulated marriages among unmarried men and unmarried mothers in 1989 to reproduce 1971 marital patterns; and (2) earnings responses induced by the simulated marriages. The results indicate that the trend away from marriage accounted for almost hall (he increase in child income inequality and more than the entire rise in child poverty rates. [ABSTRACT FROM AUTHOR]

The equivalence scales used to adjust for differences in family composition when measuring poverty exhibit considerable variation. This paper suggests an alternative approach which allows for differences in social judgments regarding the treatment of different types of family and examines the relation with the choice of poverty measure. The resulting dominance criteria cannot provide a complete ranking but allow the extent of disagreement to be identified. Their application is illustrated by the example of changes in child benefits. [ABSTRACT FROM AUTHOR]

The efficiency wage hypothesis has normally been used to generate an equilibrium level of unemployment. We use it, instead, to generate an equilibrium wage distribution. This paper starts by generalizing the previous work of Solow in this area. We then use our results on effort-wage elasticities to derive a model of wage dispersion. The wage rate is shown to be an increasing function of the damage potential of workers; that is, workers with the highest damage potential receive the highest wage. The analysis of the equilibrium of the wage distribution provides interesting qualitative insights into the nature of actual wage differentials. [ABSTRACT FROM AUTHOR]

This paper examines income inequality across nine countries using the Luxembourg Income Study data-set. New statistical tests and comparability of data provide an exceptionally clear picture of relative income inequality. Only four comparisons out of a possible 108 cannot be ranked. In most cases, differences in the definition of the recipient unit make little difference in the rankings. Irrespective of recipient unit, Sweden, Norway and Germany come out at the top of the ordinal Lorenz ranking, with Australia, Canada and the United Kingdom in the middle and the United States and Switzerland at the bottom. [ABSTRACT FROM AUTHOR]

Important new evidence on racial employment discrimination in the United States has been provided by Comanor (1973) who demonstrated that racial discrimination in hiring was a pervasive part of the US labor market in the mid-1960s. While Comanor showed significant employment effects of discrimination, he did not directly examine the related issue of racial wage rate differentials. In view of recent interest in the stability of US black-white income differences (e.g. Ashenfelter, 1970; Freeman, 1973a, b; Wohlstetter and Coleman, 1972), the issue of wage rate discrimination is of added interest, for these income differentials may result just from discriminatory hiring practices (blacks are forced to work in low-wage industries), or from a combination of wage rate discrimination and a disadvantageous employment distribution.
We seek in this paper to test statistically for the existence of wage rate differences between comparably employed blacks and whites and men and women. Because we have individual level information for 1960, 1967 and 1970, we are able to examine the question of wage rate discrimination more closely than in other studies. The plan of the paper is as follows. Section I discusses the measurement problems posed by actually testing for wage rate discrimination with Census data; Section II discusses the problems of inferring discrimination with various statistical models; Section III presents and interprets the empirical results for 1960, 1967 and 1970, and discusses the problem of sample size fragmentation; Section IV concludes. [ABSTRACT FROM AUTHOR]

This paper analyses wage inequality and the welfare effects of changes in capital and labour income tax rates for different types of agents. To achieve this, we develop a model that allows for capital-skill complementarity given non-uniform distributions of asset holdings and labour skills. We find that capital tax reductions lead to the highest aggregate welfare gains but are skill-biased and thus increase inequality. However, our analysis also shows that the inequality effects of capital tax reductions are lower over the transition period compared with the long run. [ABSTRACT FROM AUTHOR]

Much of the change in individual earnings has occurred at the top. This paper provides new evidence about the earnings distribution in the UK. The evidence is new in that it provides detail about what has happened within the top 10%, covering groups such as the top 1% and the top 0.5%. The aim is to set the recent rise in top earnings in historical perspective, and to make international comparisons. The evidence is new in that it covers the whole of the postwar period, allowing a contrast to be drawn with the 'golden age' of the 1950s. [ABSTRACT FROM AUTHOR]

A large literature has studied the impact of labour market institutions on wage inequality, but their effect on income inequality has received little attention. This paper argues that personal income inequality depends on the wage differential, the labour share and the unemployment rate. Labour market institutions affect income inequality through these three channels, and their overall effect is theoretically ambiguous. We use a panel of OECD countries for the period 1960–2000 to examine these effects. We find that greater unionization and greater wage bargaining coordination have opposite effects on inequality, implying conflicting effects of greater union presence on income inequality. [ABSTRACT FROM AUTHOR]

Existing evidence of inequality aversion relies on data from class-room experiments where subjects face hypothetical questions. This paper estimates the magnitude of inequality aversion using representative survey data, with questions related to the real-economy situations the respondents face. The results reveal that inequality aversion can be measured in a meaningful way using survey data, but the magnitudes of the estimates depend dramatically on how inequality aversion is measured. No matter how measured, the revealed inequality aversion predicts opinions on a wide range of questions related to the welfare state, such as the level of taxation, tax progressivity and the structure of unemployment benefits. [ABSTRACT FROM AUTHOR]

The paper offers a unified way to examine several puzzles on inequality dynamics. It focuses on differences in the education technology and their effects on income distributions. Our overlapping generations economy has the following features: (1) consumers are heterogenous with respect to ability and parental human capital; and (2) intergenerational transfers take place via parental direct investment in education and, public education financed by taxes (possibly, with a level determined by majority voting). We explore several variations in the production of human capital, some attributed to ‘home-education’ and others related to ‘public-education’, and indicate how various changes in education technologies affect the intragenerational income inequality along the equilibrium path. [ABSTRACT FROM AUTHOR]

This paper analyses how income redistribution affects inequality in a society in which individuals differ in their earning abilities and their preferences for consumption and leisure. After discussing the shortcomings of various standard approaches, I measure inequality in such a heterogeneous society by the inequality in individuals' so-called equivalent wages. This approach suggests that redistribution tends to reduce inequality by transferring income from high-ability to low-ability individuals, but to increase inequality by transferring income from consumption-loving to leisure-loving individuals. These countervailing effects lead in all my simulations to a U-shaped relationship between redistribution and inequality. [ABSTRACT FROM AUTHOR]

The paper provides robust normative comparisons of 12 OECD countries based on their distributions of disposable income and access to two regional public goods: infant mortality and pupil–teacher ratios at public schools. Comparisons are performed using two and three-dimensional dominance criteria that coincide with the unanimity of utilitarian judgments taken over specific classes of utility functions. The criteria succeed in ranking conclusively about 30% of all possible comparisons in the two-dimensional case, compared with 67% for one-dimensional income-based comparisons and 6% for three-dimensional ones. Introducing local public goods seems to worsen the relative standing of Anglo-Saxon countries. [ABSTRACT FROM AUTHOR]

This paper deals with the question of how to incorporate modern responsibility-catering egalitarianism into economic theory on the measurement of income inequality. I present a particular axiomatic expression of the main aspects of such egalitarianism. Then, to measure offensive inequality separately I construct a norm or reference income distribution based upon the axiomatic model to replace the perfectly equal income distribution that is used as norm by all common inequality measures. I defend the use of a particular measure of distributional change to determine the degree of offensive inequality, and apply the method to Belgian income data. [ABSTRACT FROM AUTHOR]

In this paper I show that persistent inequality in the distribution of human capital and a negative relation between initial inequality and steady-state aggregate output may follow from the fact that the poor require relatively higher returns to increase expenditure on education. Moreover, I show that poverty traps emerging in models where individual transitions do not depend on aggregate dynamics, though not robust to the introduction of idiosyncratic uncertainty, may still be relevant observationally, if idiosyncratic shocks occur with low probability. In this context, I also analyse the implications of introducing a public education system. [ABSTRACT FROM AUTHOR]

In this paper I study wage mobility in Great Britain using the New Earnings Surveys of 1975- 94 and the British Household Panel Surveys of 1991-94. Measuring mobility in terms of decile transition matrices, I find a considerable degree of immobility within the wage distribution from one year to the next. Mobility is higher when measured over longer time periods. Those in lower deciles in the wage distribution are much more likely to exit into unemployment and non-employment. Measuring mobility by studying changes in individuals' actual percentile rankings in the wage distribution, I find evidence that short-run mobility rates have fallen since the late 1970s. This has potentially important welfare implications, given the rise in cross-section earnings inequality observed over the last two decades. [ABSTRACT FROM AUTHOR]

This paper investigates the factors that might have influenced earnings inequality among female heads of households over an extended period. The study used the generalized entropy measures of inequality in short-run as well as long-run income for the period 1978-86. The results suggest that short-run inequality has generally increased. These fluctuations are due partially to the existence of transitory components which distort our view. The measured long-run inequality shows a decline in the early years because of the smoothing of the transitory components. Race in conjunction with age, education and marital status is used to investigate their effects. Race and education are shown to be the most influential factors. The mobility profiles show the existence of permanent inequality among female heads of households. [ABSTRACT FROM AUTHOR]

Despite decades of progress, women remain underrepresented in the upper part of the earnings distribution. We review the recent research trying to explain this phenomenon. After briefly revisiting gender differences in education, we turn our attention to a body of work that has argued that gender differences in psychological attributes are holding back women's earnings. We then review another active area of research focused on the challenges that women may face when trying to juggle competing demands on their time in the workplace and the home, particularly when the home includes children. We discuss recent work documenting women's greater demand for flexibility in the workplace, as well as work measuring the labour market penalties associated with such demand for flexibility, particularly in the higher paying occupations in the economy. We highlight possible countervailing forces (both at work and at home) that may explain why these work–family considerations may remain highly relevant to today's glass ceiling despite reduced time spent in non‐market work and a trend towards a more equal division of non‐market work between men and women. Finally, we discuss the role that public policy and human resource practices may play in adding more cracks to the glass ceiling. [ABSTRACT FROM AUTHOR]

The paper offers several explanations for income inequality trends in Israel during 1979-93. Two types of analysis are employed: decomposition of the Gini coefficient by income source and population sub-group, and time-series regression on macroeconomic variables. It is found that the slight increase in inequality over the period is a result of opposing forces, and that the major difference between the inflation (1979-84) and stabilization (1985-93) periods is in the inequality-reducing effect of direct taxes, increasing in the first period while declining in the second. Unemployment had a regressive impact, whereas inflation acted as a progressive tax in the first period but not in the second. [ABSTRACT FROM AUTHOR]

A trade union, facing a stochastic demand for labour, sets a state invariant money wage, so as to maximise the sum of the expected utilities of its members. In order to protect employment prospects of members in bad states, the wage is low enough to allow outsiders to be recruited in good states. This allows us to endogenise union membership, the level of which will follow a stochastic differential equation. We derive the response of changes in the union's optimal wage to changes in fiscal parameters. [ABSTRACT FROM AUTHOR]

The present paper provides a thorough discussion of a relatively simple diagram which allows one to depict both the orthodox Nash equilibrium and the set of Pareto-optimal allocations in an economy with a pure public good. This diagram also allows for a simple representation of Lindahl equilibrium in such an economy. In the simple two person example, our diagram is analogous to the Edgeworth box treatment of a private goods exchange economy, and in this special case it can accommodate differences in preferences or endowments without complications. For an economy of more than two people, the diagram may still be used if the assumption of identical tastes and endowments across consumers is made. [ABSTRACT FROM AUTHOR]

The equivalence between devaluations and particular variations in the stocks of money in the home country and the rest of the world has now been demonstrated several times for flexible-price monetary models (Kemp, 1970; Mundell, 1971, Chapter 9; Kuska, 1972; Dornbusch, 1973a, b; Berglas, 1974). In this paper I wish to extend the analysis by presenting two more equivalence theorems: (1) that between devaluation and equiproportional export subsidies and import tariffs and (2) that between devaluation and transfer payments.
Equivalence 1 has been stated in the literature from time to time, but never with complete precision. Equivalence 2 was first suggested by Johnson (1956), but he worked with a model in which the transfer arose from a change in the terms of trade. In flexible-price models, devaluation works through an asset effect so that a different approach is required. [ABSTRACT FROM AUTHOR]

Motivated by the introduction of the UK Gender Pay Gap Reporting legislation to large firms, defined as over 250 employees, we use linked employee–employer panel data from the Annual Survey of Hours and Earnings to explore pre‐legislation variation in the gender pay gap by firm size. In doing so, we contribute to the evidence on the relationship between two prominent empirical regularities in the labour economics literature, namely the gender pay gap and the firm‐size wage premium. We find that both the raw and adjusted gender pay gaps increase with firm size in the UK private sector, even after controlling for unobserved worker heterogeneity, consistent with the legislation being targeted effectively. However, this conclusion changes after accounting for unobserved firm‐level heterogeneity. Large firms have smaller within‐firm raw gender pay gaps and similar adjusted gender pay gaps when compared to smaller firms. Our findings are not specific to the current definition of large firms but hold more generally, including at alternative proposed size thresholds. [ABSTRACT FROM AUTHOR]

We study earnings and income inequality in Britain over the past two decades, including the period of relatively 'inclusive' growth from 1997 to 2004, and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the 'new inequality' at the very top. Household earnings inequality has risen, driven by male earnings-although a 'catch-up' of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system's insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes. [ABSTRACT FROM AUTHOR]

I determine UK income inequality levels and trends by combining inequality estimates from tax return data (for the 'rich') and household survey data (for the 'non-rich'), taking advantage of the better coverage of top incomes in tax return data (which I demonstrate) and creating income variables in the survey data with the same definitions as in the tax data to enhance comparability. For top income recipients, I estimate inequality and mean income by fitting Pareto models to the tax data, examining specification issues in depth, notably whether to use Pareto I or Pareto II (generalized Pareto) models, and the choice of income threshold above which the Pareto models apply. The preferred specification is a Pareto II model with a threshold set at the 99th or 95th percentile (depending on year). Conclusions about aggregate UK inequality trends since the mid-1990s are robust to the way in which tax data are employed. The Gini coefficient for individual gross income rose by around 7% or 8% between 1996/7 and 2007/8, with most of the increase occurring after 2003/4. The corresponding estimate based wholly on the survey data is around −5%. [ABSTRACT FROM AUTHOR]