Changes in Household Income Inequality Over the Business Cycle: Husbands' Earnings and Wives' Labor Supply in Japan during the Global Financial Crisis

This study examines how household income inequality in Japan is impacted by changes in a couple's income and employment status after economic crises, using the Keio Household Panel Survey（KHPS）. Our analysis of the periods before and after the Global Financial Crisis yields three notable findings. First, during the recession, incomes stagnated for households in the middle- and high-income brackets, with many experiencing income declines. Conversely, many low-income households saw incomes increase even during the recession, and the overall income gap may have shrunk. Second, concerning the impact of changes in the husband's income on the wife's employment, we show that when the husband's income declines, the added worker effect is observed. This effect was larger in households whose income was originally low. Third, we calculate the Gini coefficient both by using only the husband's labor income, and also with the wife's labor income added. We find that the wife's labor income reduced household income inequality, in particular for several years following the 2008 recession. In conclusion, when focusing only on married households, income inequality appears to shrink during economic recessions.