Less Income Inequality and More Growth – Are They Compatible?: Part 1: Mapping Income Inequality Across the OECD

Abstract

Countries differ widely with respect to the level of labour income inequality among individuals of working age. Labour income inequality is shaped by differences in wage rates, hours worked and inactivity rates. Individual labour income inequality is the main driver of household market income inequality, with family formation as well as self-employment and capital income dispersion playing a smaller role. Household disposable income dispersion is lower in all OECD countries than household market income inequality, due to the redistributive effect of tax and transfer systems, but redistribution differs widely across countries. This paper maps income inequality for all OECD countries across various inequality dimensions and summarizes them in inequality outcome diamonds. It also provides a cluster analysis that identifies groups of countries that share similar inequality patterns.

Keywords: Inequality, welfare, poverty, cluster analysis

JEL Classification: C38, D6, D30, D63, E24, I3, I24