Unpacking transatlantic income inequality
Abstract
This paper uses newly harmonized survey and register data on incomes and labor market outcomes as the basis for consistent comparisons of inequalities across 17 North American and European countries over the period 1995–2021. We examine trends in disposable income inequality in the working-age population, defined as persons aged 25 to 60, as well as its component parts of market income inequality and redistribution through government tax and transfer systems. We adjust incomes to allow for changes in education, population aging, and household structure in each country. We test for convergence across countries in demographically-adjusted disposable income inequality, along with market income inequality and redistribution. There is strong evidence of convergence over time in disposable income inequality across the 17 countries, despite a divergence in the dispersion of market income inequality driven by very heterogeneous trends for hours of work and the number of workers in households across countries. Consistent with this we find a strong convergence across countries in the dispersion of our measure of redistribution. There are reductions over time in inequality-reducing redistribution in the Nordic countries and increases in some other European and North American countries, with the net effect being more similarity across countries, a lower average level of redistribution, and a higher average level of disposable income inequality. These trends are being driven by the bottom 95% of the income distribution. Our results are robust to a variety of alternative specifications including the measure of inequality, trimming of data outliers, and sample period.
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Authors: James P. Ziliak, Jonathan Cribb, Richard W. Blundell, James W. Banks, David Green, Antoine Bozio, Malka Guillot, Barra Roantree, Maxime Tô, Brindusa Anghel, Cristina Barceló, Jim Been, Patrick Bennett, Maximilian Blömer, Olympia Bover, Koen Caminada, Bart Capéau, Daniele Checchi A, Svetoslav Danchev, André Decoster, Bram De Rock Z, Kelly Foley, Giorgos Gatopoulos, Martin Halla, Bradley L. Hardy, Elena Herold, Laura Hospido, Tullio Jappelli, Egbert Jongen, Niki Kalavrezou, Arizo Karimi, Elizabeth Krause, Max Lay, Søren Leth‐Petersen, Charlotte Lucke, Immacolata Marino, Antonis Mavropoulos, Carlos Oliveira, Marten O. Palme, Tuuli Paukkeri, Grigoris Pavlou, Andreas Peichl, Pedro Portugal, Lukas Puschnig, Pedro S. Raposo, Ann-Christin Rathje, Terhi Ravaska, Craig Riddell, Marja Riihelä, Johan Sæverud, Kjell G. Salvanes, Annalisa Scognamiglio, Anne Steuernagel, Jonas Vanderkelen, Heike Vethaak, Nikos Vettas, Andrea Michaela Weber, Tom Wernham
Institutions: Georgetown University, University of British Columbia, University of Liverpool, KU Leuven, University of Manchester, University College London, Ludwig-Maximilians-Universität München, University of Copenhagen, Friedrich-Alexander-Universität Erlangen-Nürnberg, Tampere University, Uppsala University, University of Kentucky, University of Liège, University of Milan, University of Saskatchewan, Stockholm University, Leiden University, Vienna University of Economics and Business, Universidade Católica Portuguesa, Central European University, Trinity College Dublin, Université Libre de Bruxelles, Hague Institute for Global Justice, Austrian Institute of Economic Research, Ifo Institute for Economic Research, Paris School of Economics, Trinity College, École des hautes études en sciences sociales, Bank of Spain, Norwegian School of Economics, Athens University of Economics and Business, NOVA School of Business and Economics, University of Tampere, Institute for Fiscal Studies, Centro de Estudios Monetarios y Financieros, Centre for Studies in Economics and Finance, European Centre for Social Welfare Policy and Research, Banco de Portugal