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Illustrating the Implications of How Inequality is Measured: Decomposing Earnings Inequality by Race and Gender

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  • Markus Schneider

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Abstract

This paper makes three distinct contributions: it presents a novel modification to an established methodology for assessing inequality using the CPS ASEC data, it illustrates how valuable a multi-metric inequality analysis is by reconciling some open questions regarding the trend in inequality and the role of the composition of income along the distribution, and it provides a baseline assessment of the trend in earnings inequality for four distinct groups of income earners. The evolution of earnings inequality from 1995 to 2010 is compared to increasing inequality in total income as documented by Thomas Piketty and Emmanuel Saez to show that earnings inequality has followed a qualitatively similar, though less extreme trend. In the process, the disconnect between the trend in the Gini coefficient and inequality assessed via the share of income going to the top 1 % of income earners is reconciled through the use of several alternative inequality indices. Finally, the evolution of the earnings distribution for black women, black men, white women, and white men are considered separately, which shows that there are important differences in the experience of inequality. The main findings are that only white men have experienced changes in within-group earnings inequality that parallel the changes in inequality seen in the overall distribution. By contrast, black income earners have seen no notable increase in within-group inequality by any measure, suggesting that they may rightly perceive growing inequality as primarily a between-group phenomena. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Markus Schneider, 2013. "Illustrating the Implications of How Inequality is Measured: Decomposing Earnings Inequality by Race and Gender," Journal of Labor Research, Springer, vol. 34(4), pages 476-514, December.
  • Handle: RePEc:spr:jlabre:v:34:y:2013:i:4:p:476-514
    DOI: 10.1007/s12122-013-9168-y
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    References listed on IDEAS

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    Cited by:

    1. Shaikh, Anwar & Papanikolaou, Nikolaos & Wiener, Noe, 2014. "Race, gender and the econophysics of income distribution in the USA," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 415(C), pages 54-60.

    More about this item

    Keywords

    Dagum distribution; Earnings inequality; Gini coefficient; Income distribution; D31; D63; C46; J3;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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