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Factor Components of Inequality: A Cross-Country Study

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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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1318.

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Length: 61 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:aim:wpaimx:1318
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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  3. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2011. "Estimating trends in US income inequality using the Current Population Survey: the importance of controlling for censoring," Journal of Economic Inequality, Springer, vol. 9(3), pages 393-415, September.
  4. Stephen P. Jenkins & Shuaizhang Feng & Richard V. Burkhauser, 2007. "Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults," Working Papers 72, ECINEQ, Society for the Study of Economic Inequality.
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  10. Nolan, Brian, 1987. "Cyclical Fluctuations in Factor Shares and the Size Distribution of Income," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 33(2), pages 193-210, June.
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  16. Checchi, Daniele & García-Peñalosa, Cecilia, 2005. "Labour Market Institutions and the Personal Distribution of Income in the OECD," IZA Discussion Papers 1681, Institute for the Study of Labor (IZA).
  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. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-56, February.
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  21. Martin FOURNIER, 2001. "Inequality decomposition by factor component : a “rank-correlation” approach illustrated on the Taiwanese case," Discussion Papers (REL - Recherches Economiques de Louvain) 2001042, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  22. Parker, Simon C, 1999. "The Inequality of Employment and Self-Employment Incomes: A Decomposition Analysis for the U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(2), pages 263-74, June.
  23. 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 421-30, March.
  24. 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, 09.
  25. 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.
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  32. Markus Jäntti & Stephen Jenkins, 2010. "The impact of macroeconomic conditions on income inequality," Journal of Economic Inequality, Springer, vol. 8(2), pages 221-240, June.
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