IDEAS home Printed from https://ideas.repec.org/p/aia/ginidp/12.html
   My bibliography  Save this paper

GINI DP 12: Factor Components of Inequality. A Cross-Country Study

Author

Listed:
  • Cecilia Garcia Peñalosa

    (Centre de la Vieille Charité, GREQAM)

  • Orgiazzi, E.

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 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. 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. In some countries the contribution of self-employment income to inequality has been on the rise. In others, increases in inequality in capital income –probably caused by tax changes- account for a substantial fraction of the observed changes in the distribution of income. JEL classification numbers: D31, D33

Suggested Citation

  • Cecilia Garcia Peñalosa & Orgiazzi, E., 2011. "GINI DP 12: Factor Components of Inequality. A Cross-Country Study," GINI Discussion Papers 12, AIAS, Amsterdam Institute for Advanced Labour Studies.
    • Handle: RePEc:aia:ginidp:12
    as

    Download full text from publisher

    File URL: https://www1.feb.uva.nl/aias/DP12-Garcia-Penalosa,Orgiazzi.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen Jenkins & Philippe Kerm, 2005. "Accounting for income distribution trends: A density function decomposition approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(1), pages 43-61, April.
    2. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    3. Machin, Stephen, 1996. "Wage Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(1), pages 47-64, Spring.
    4. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(1), pages 21-48, January.
    5. Peter Gottschalk & Sheldon Danziger, 2005. "Inequality Of Wage Rates, Earnings And Family Income In The United States, 1975–2002," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 231-254, June.
    6. Erik Fjærli & Rolf Aaberge, 2000. "Tax Reforms, Dividend Policy and Trends in Income Inequality Empirical Evidence based on Norwegian Data," Discussion Papers 284, Statistics Norway, Research Department.
    7. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
    8. Jenkins, Stephen P, 1995. "Accounting for Inequality Trends: Decomposition Analyses for the UK, 1971-86," Economica, London School of Economics and Political Science, vol. 62(245), pages 29-63, February.
    9. Paul van den Noord & Chistopher Heady, 2001. "Surveillance of Tax Policies: A Synthesis of Findings in Economic Surveys," OECD Economics Department Working Papers 303, OECD Publishing.
    10. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1215-1244.
    11. John C. H. Fei & Gustav Ranis & Shirley W. Y. Kuo, 1978. "Growth and the Family Distribution of Income by Factor Components," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 17-53.
    12. Daniele Checchi & Cecilia García‐Peñalosa, 2010. "Labour Market Institutions and the Personal Distribution of Income in the OECD," Economica, London School of Economics and Political Science, vol. 77(307), pages 413-450, July.
    13. Roine, Jesper & Waldenström, Daniel, 2005. "Top Incomes in Sweden over the Twentieth Century," SSE/EFI Working Paper Series in Economics and Finance 602, Stockholm School of Economics.
    14. Cowell, Frank A & Jenkins, Stephen P, 1995. "How Much Inequality Can We Explain? A Methodology and an Application to the United States," Economic Journal, Royal Economic Society, vol. 105(429), pages 421-430, March.
    15. Rolf Aaberge & Tom Wennemo & Anders Bjorklund & Markus Jantti & Peder J. Pedersen & Nina Smith, 2000. "Unemployment Shocks and Income Distribution: How did the Nordic Countries Fare during their Crises?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 77-99, March.
    16. Stephane Mussard, 2004. "The bidimensional decomposition of the Gini ratio. A case study: Italy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 503-505.
    17. Yves Flückiger & Jacques Silber, 1995. "Income Inequality Decomposition by Income Source and the Breakdown of Inequality Differences Between Two Population Subgroups," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(IV), pages 599-615, December.
    18. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    19. Atkinson, A.B. & Brandolini, A., 2000. "Promise and Pitfalls in the Use of 'Secondary' Data -Sets: Income Inequality in OECD Countries," Papers 379, Banca Italia - Servizio di Studi.
    20. Fields, Gary S, 1979. "Income Inequality in Urban Colombia: A Decomposition Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 25(3), pages 327-341, September.
    21. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," PSE-Ecole d'économie de Paris (Postprint) halshs-00754875, HAL.
    22. Jesper Drescher, 1999. "Income Inequality Decomposition by Income Source and by Population Subgroups: A Theoretical Overview and the Empirical Case of Denmark," LIS Working papers 209, LIS Cross-National Data Center in Luxembourg.
    23. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    24. Nripesh Podder, 1993. "The Disaggregation Of The Gin1 Coefficient By Factor Components And Its Applications To Australia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(1), pages 51-61, March.
    25. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
    26. Björklund, Anders & Palme, Mårten, 1997. "Income Redistribution within the Life Cycle versus between Individuals: Empirical Evidence Using Swedish Panel Data," SSE/EFI Working Paper Series in Economics and Finance 197, Stockholm School of Economics.
    27. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
    28. Rolf Aaberge & Anthony B. Atkinson, 2008. "Top Incomes in Norway," Discussion Papers 552, Statistics Norway, Research Department.
    29. Magnus Gustavsson, 2008. "A New Picture Of Swedish Earnings Inequality: Persistent And Transitory Components, 1960–1990," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 324-349, September.
    30. Graham Pyatt & Chau-nan Chen & John Fei, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(3), pages 451-473.
    31. Gottschalk,Peter & Gustafsson,Bjorn A. & Palmer,Edward E. (ed.), 1997. "Changing Patterns in the Distribution of Economic Welfare," Cambridge Books, Cambridge University Press, number 9780521562621.
    32. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cecilia García-Peñalosa & Elsa Orgiazzi, 2013. "Factor Components of Inequality: A Cross-Country Study," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(4), pages 689-727, December.
    2. Cecilia Garc a-Pe alosa & Richard Breen & Elsa Orgiazzi, 2008. "Factor Components of Inequality: Cross-Country Differences and Time Changes," LIS Working papers 503, LIS Cross-National Data Center in Luxembourg.
    3. Daniele Checchi & Cecilia García-Peñalosa & Lara Vivian, 2016. "Are changes in the dispersion of hours worked a cause of increased earnings inequality?," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-34, December.
    4. Stéphane Mussard & Michel Terraza, 2009. "Décompositions des mesures d'inégalité : le cas des coefficients de Gini et d'entropie," Recherches économiques de Louvain, De Boeck Université, vol. 75(2), pages 151-181.
    5. Jurkatis, Simon & Strehl, Wolfgang, 2014. "Gini decompositions and Gini elasticities: On measuring the importance of income sources and population subgroups for income inequality," Discussion Papers 2014/22, Free University Berlin, School of Business & Economics.
    6. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    7. Brewer, Mike & Wren-Lewis, Liam, 2012. "Accounting for changes in income inequality: decomposition analyses for Great Britain, 1968-2009," ISER Working Paper Series 2012-17, Institute for Social and Economic Research.
    8. Simon Jurkatis, "undated". "Dos and Don'ts of Gini Decompositions," BDPEMS Working Papers 2013003, Berlin School of Economics.
    9. Magne Mogstad, 2007. "Measuring Income Inequality under Restricted Interpersonal Comparability," Discussion Papers 498, Statistics Norway, Research Department.
    10. Daniele Checchi & Cecilia García-Peñalosa, 2008. "Labour market institutions and income inequality [‘Globalisation and the great U-turn: Income inequality trends in 16 OECD countries’]," Economic Policy, CEPR;CES;MSH, vol. 23(56), pages 602-649.
    11. Stéphane Mussard, 2006. "La décomposition des mesures d’inégalité en sources de revenu : l’indice de Gini et les généralisations," Cahiers de recherche 06-05, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    12. Michele Giammatteo, 2007. "The bidimensional decomposition of inequality: A nested Theil approach," LIS Working papers 466, LIS Cross-National Data Center in Luxembourg.
    13. Kimhi, Ayal, 2009. "Land Reform and Farm-Household Income Inequality: The Case of Georgia," Discussion Papers 54159, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    14. Daniele Checchi & Cecilia García‐Peñalosa, 2010. "Labour Market Institutions and the Personal Distribution of Income in the OECD," Economica, London School of Economics and Political Science, vol. 77(307), pages 413-450, July.
    15. Yunbo Zhou, 2009. "The factors that impact income inequality of rural residents in China: Decomposing the Gini coefficient from income components," Frontiers of Economics in China, Springer;Higher Education Press, vol. 4(4), pages 617-632, December.
    16. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute of Labor Economics (IZA).
    17. Mike Brewer & Liam Wren-Lewis, 2016. "Accounting for Changes in Income Inequality: Decomposition Analyses for the UK, 1978–2008," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(3), pages 289-322, June.
    18. St鰨ane Mussard & Luc Savard, 2012. "The Gini multi-decomposition and the role of Gini's transvariation: application to partial trade liberalization in the Philippines," Applied Economics, Taylor & Francis Journals, vol. 44(10), pages 1235-1249, April.
    19. Paul, Satya, 2004. "Income sources effects on inequality," Journal of Development Economics, Elsevier, vol. 73(1), pages 435-451, February.
    20. Kimhi, Ayal, 2011. "Comment: On the Interpretation (and Misinterpretation) of Inequality Decompositions by Income Sources," World Development, Elsevier, vol. 39(10), pages 1888-1890.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aia:ginidp:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiemer Salverda (email available below). General contact details of provider: https://edirc.repec.org/data/aiuvanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.