Factor Components of Inequality: A Cross‐Country Study

39 Pages Posted: 5 Nov 2013

See all articles by C. Garcia-Peñalosa

C. Garcia-Peñalosa

National Center for Scientific Research (CNRS) - GREQAM; CESifo (Center for Economic Studies and Ifo Institute)

Elsa Orgiazzi

Centre de Recherche en Économie et Management (CREM)

Date Written: December 2013

Abstract

This paper uses data from the Luxembourg Income Study to examine some of the forces that have driven changes in household income inequality over the last three decades of the twentieth century. We decompose inequality for six countries (Canada, Germany, Norway, Sweden, the U.K., and the U.S.) into the three sources of market income (earnings, property income, and income from self‐employment) and taxes and transfers. Our findings indicate that although changes in the distribution of earnings are an important force behind recent trends, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings which dampened its impact on overall household income inequality. In some countries the contribution of self‐employment income to inequality has been on the rise, while in others, increases in inequality in capital income account for a substantial fraction of the observed distributional changes.

Keywords: decomposition by population subgroups, factor decomposition, income inequality

JEL Classification: D31, D33

Suggested Citation

Garcia-Penalosa, Cecilia and Orgiazzi, Elsa, Factor Components of Inequality: A Cross‐Country Study (December 2013). Review of Income and Wealth, Vol. 59, Issue 4, pp. 689-727, 2013, Available at SSRN: https://ssrn.com/abstract=2349918 or http://dx.doi.org/10.1111/roiw.12054

Cecilia Garcia-Penalosa (Contact Author)

National Center for Scientific Research (CNRS) - GREQAM ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France
+33 491 140746 (Phone)
+33 491 900227 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Elsa Orgiazzi

Centre de Recherche en Économie et Management (CREM) ( email )

7, Place Hoche
Rennes, Bretagne 35065
France

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