Search

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]

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 study aims to see or find out 1) the phenomenon of income inequality during 5 years of observation in the Districts / Cities of West Sumatra Province, 2) Human Development Index in Districts / Cities of West Sumatra Province, 3) The Impact of Income Inequality on the Human Development Index in Districts / Cities of West Sumatra Province, The type of research used is associative research. This research was conducted using the object of research in districts / cities in West Sumatra province consisting of 19 districts / cities in Sumatra Barat province, In this study using panel data regression equations and simple linear regression. Research data used during the period 2017-2021 with 90 samples. The results showed that: 1) Income Inequality has a negative and significant impact on the Human Development Index in the Districts / Municipalities of West Sumatra Province.

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]

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]

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

Fuelled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has grown over recent years, both in the public debate and in academia. A key concern is that the wealth tax may reduce the amount of capital available to closely held firms and drag down their employment. Yet knowledge about the behavioural effects of a wealth tax is limited. A wealth tax is almost by construction imperfect, as the value of some assets is unobserved. In particular, intangible assets held by non‐traded firms are in practice tax‐exempt, giving firm owners an incentive to allocate wealth into their businesses, for example, in the form of (untaxed) human capital investments. We utilize rich Norwegian register data and a series of tax reforms implemented between 2007 and 2017 to study how a net wealth tax imposed on owners of small and medium‐sized businesses affects their firms' employment. Identification of causal effects is based on a saturated control function approach, fully isolating the influence of tax reforms. Our results indicate a positive causal relationship between the level of a household's wealth tax and subsequent employment growth in the taxpayers' closely held firms. [ABSTRACT FROM AUTHOR]

Population inequality in terms of well-being is an integral part of any society. Under market conditions, the problem of inequality in income distribution is particularly acute, as income and wealth inequality are closely linked to people’s quality of life and stability in society. As a result, it is necessary to promote active economic and social policies aimed at reducing disparities, inequality in the distribution of wealth and income. The paper analyzes some aspects of income inequality in the Republic of Moldova, the trends that have manifested themselves over the last decade, as well as the factors that have influenced these trends. Based on the identified problems, some ways of reducing this phenomenon in the Republic of Moldova were formulated.

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]

What is the impact of warfare on inequality and the social contract? Using local data on bombing, the evolution of wealth inequality and vote shares for the Labour Party in Britain around the Second World War, we establish two results. First, on average, we find no impact of bombing on inequality. However, there is considerable heterogeneity, and this result is driven by southern Britain. In northern Britain, bombing led to significant falls in inequality. Second, heavier bombing led to a significant increase in the vote share for Labour after the war everywhere, but this effect is transitory in the south while it is permanent in the north. Our results obtain both in a simple difference‐in‐differences framework as well as in a panel‐regression discontinuity framework in which we exploit the limited range of German fighter escort planes. Our results provide novel causal evidence for the inequality‐reducing impact of warfare, and we interpret them as consistent with the notion that the impact of the war also led to a reconfiguration of the social contract in Britain. [ABSTRACT FROM AUTHOR]

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]

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]

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]

We study how attitudes to inheritance taxation are influenced by information about the role of inherited wealth in society. Using a randomized experiment in a register‐linked Swedish survey, we find that informing individuals about the large aggregate importance of inherited wealth and its link to inequality of opportunity significantly increases the support for inheritance taxation. Changes in the perceived economic importance of inherited wealth and altered views on whether luck matters most for economic success appear to be driving factors behind the treatment effect. Our findings suggest that the low salience of inherited wealth could be one explanation behind the relatively marginalized role of inheritance taxation in developed economies. [ABSTRACT FROM AUTHOR]

Financial information allows investors to condition the portfolio allocation on valuable signals on asset returns. Therefore investors have incentives to spend on information gathering. If interpreted correctly, information signals allow investors to obtain higher returns and more efficient portfolios. Since information is costly, wealthier and more risk tolerant investors have stronger incentives to invest in information. Overconfident investors who overstate the value of the information still obtain higher average returns but end up with less efficient portfolios. We study these implications using two unique surveys of customers of a leading Italian bank, with portfolio data and measures of individual investment in financial information. We find that investment in information is positively associated with returns to financial wealth and negatively associated with the portfolio Sharpe ratio. Furthermore, the latter falls with proxies of overconfidence. We relate these findings to the wealth inequality debate. [ABSTRACT FROM AUTHOR]

We examine the impact of house prices on labour supply decisions using UK microdata. We combine household survey data with local‐level house price measures and controls for local labour demand. Our microdata also allow us to control for individual level income expectations. We find significant house price effects on labour supply, consistent with leisure being a normal good. Labour supply responses to house prices are concentrated among young married female owners and older owners. This finding suggests that house prices affect the decisions of marginal workers in the economy. Our estimates imply that house prices are economically important in the participation decisions for these workers. [ABSTRACT FROM AUTHOR]

This study explores how life expectancy at age 35 has evolved across the income distribution in Sweden over time. We examine individual income for men 1970–2007 and family income for both men and women 1980–2007. During this period, income inequality increased in most western countries, but especially so in Sweden. Drawing on a large sample of the Swedish population, our results show that the gap in life expectancy between the richest and poorest fifths of the income distribution also increased. This was the case both for individual and family income. The increase was larger for men than for women, but the only group with stagnant life expectancy at age 35 was women in the lowest income quintile group. Between 1986 and 2007, the difference between the lowest and highest family income quintiles increased by about one year for women and by almost two years for men. The causes of death that most significantly contributed to the increased disparities among women were circulatory and respiratory diseases. For men, circulatory disease mortality alone caused most of the increased disparities. [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]

No voters cast their votes based on perfect information, but richer voters are on average best informed. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, income is more important in affecting voting behaviour for more informed voters than for less informed voters. Further, when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory. [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 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]

What are the long-term effects of policies intended to equalize opportunities among different social classes of children? To find out, we study the stationary states of an intergenerational model where adults are either White or Blue collar employees. Both adults and the state invest in their children's education. Our analysis indicates that the major obstacle to equalizing opportunities in the long run is private educational investment. Next we examine economies where only the state invests in education, motivated by the Nordic experience. In a majority of these economies, no child lags behind regarding future prospects, a theoretical result confirmed by simulations. [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]

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]

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]

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]

Despite post-college degree holders now making up nearly 15% of the US adult workforce, studies of their labour market performance remain sparse. This is surprising given that they are the most educated group in the labour force and as, over time, they have done significantly better than all other education groups. We show a significant rise over time in the postgraduate wage premium, reflecting an increased relative demand due to their superior skill sets and occupational status. The increase in the demand for postgraduates is a key factor behind rising wage inequality within the increasingly heterogeneous college graduate workforce. [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]

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]

We introduce and characterize a new measure of aggregate income growth that allows us to give more weight to individuals with lower individual income growth. Our measure includes several important measures of directional mobility encountered in the literature. The empirical application compares the measure of income growth between the USA and Germany, and finds that giving more weight to individuals with lower income growth reverses the ranking. [ABSTRACT FROM AUTHOR]

I argue that rising inequality in offered wages lowers average working hours. If labour supply is concave in wages, a decrease in the working hours of low-paid workers is greater than an increase in working hours of high-paid workers. Furthermore, due to low market opportunities, some low-paid workers may leave the labour force. Using CPS- MORG data for prime-age men, I find evidence in support of this explanation. I establish empirically the concavity of the labour supply and find evidence that after controlling for the average wage, wage inequality has a negative effect on labour supply. [ABSTRACT FROM AUTHOR]

We explore the determinants of individual wellbeing as measured by self-reported levels of satisfaction with income and life. Making use of the German Socio-Economic Panel, we provide empirical evidence for wellbeing depending on absolute and relative income levels in a dynamic framework where status and signal effects play a role. This finding holds after controlling for other factors in a multivariate setting. The main novelty is the consideration of dynamic aspects: the individual's own history and the relative income performance with respect to other society members play major roles in the assessment of individual wellbeing. [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]

We examine the relationship between technological complexity and wage inequality, using an efficiency wage model that adopts Kremer's O-ring production function. The model has two main implications: (i) when the production process becomes more complex, within-task wage differences increase between plants, and (ii) between-task wage differences increase within plants. We study these implications empirically using industry data providing quantified information on the complexity of the tasks. We find that wages increase in all the tasks with the complexity of the production process. Furthermore, the relationship between the complexity of the tasks and wages is steepest in the firms with more complex production processes. [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]

Using semiparametric density estimation techniques, we analyse the effect of rising dispersion of men's earnings and related changes in family behaviour on increasing inequality in the distribution of family income in the United States. For the period 1969–1989, the growing dispersion of men's earnings and changing family structure can account for most of the rise in family income inequality. By contrast, the increase in labour force participation by women offset this trend. Inequality grew at a slower rate in the 1990s than in earlier decades, largely because of stabilization in the relative earnings of men from low-income families. [ABSTRACT FROM AUTHOR]

This paper analyses income distribution changes in New Zealand between 1983 and 1998. We use a semi-parametric kernel density approach and a range of inequality summary measures to assess the distributional effects of changes in five sets of factors: household structure, National Superannuation (old age pension), socio-demographic attributes, employment outcomes, and ‘economic returns’ to such attributes and employment outcomes. Changes in household structure and attributes are the main factors contributing to the rise in inequality. Employment changes and changing returns had a more modest impact. The results are qualitatively robust to a variety of equivalization, income, and weighting measures. [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]

The paper presents a decomposition of income mobility indices into two basic sources: mobility induced by a change of the income distribution shape, and mobility induced by a reordering of individuals in the income pecking order. The decomposition procedure, based on counterfactual distributions, results in a decomposition that is applicable to a broad class of mobility measures. Application to income ‘movement’ indices with data for Belgium, Western Germany and the USA indicates that reranking has been the major force behind income mobility. [ABSTRACT FROM AUTHOR]

This paper presents a model of inequality, income determination and fertility, that is consistent with aggregated stylized facts and individual survey data on fertility and income. It shows that indivisibilities in human capital investments limit the possibility of trade-off between the quality and the quantity of children. This generates a non-monotonic relationship between income and fertility at the micro level. On the aggregate, the total fertility rate can increase or decrease with income, depending on the income distribution of the population and on the private cost of education. [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]