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Factor Components of Inequality: A Cross-Country Study

  • Cecilia García-Peñalosa
  • Elsa Orgiazzi

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 20th century. We decompose inequality for 6 countries (Canada, Germany, Norway, Sweden, the UK, and the US) 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 aspect of recent increases in inequality, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings that 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.

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Article provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.

Volume (Year): 59 (2013)
Issue (Month): 4 (December)
Pages: 689-727

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Handle: RePEc:bla:revinw:v:59:y:2013:i:4:p:689-727
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