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Accounting for changes in income inequality: decomposition analyses for Great Britain, 1968-2009

  • Brewer, Mike
  • Wren-Lewis, Liam

We analyse income inequality in Great Britain over the period 1968-2009 in order to understand why income inequality rose very rapidly over the period 1978-91 and then stopped rising. We find that earnings inequality has risen fairly steadily since 1978, but other factors that caused inequality to rise in 1978-91 have since reversed. Inequality in investment and pension income has fallen since 1991, as has inequality between those with and without employment. Furthermore, certain household types – notably the elderly and those with young children – which had relatively low incomes in 1978-91 have seen their incomes converge with others.

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File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2012-17.pdf
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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2012-17.

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Date of creation: 29 Aug 2012
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Publication status: published
Handle: RePEc:ese:iserwp:2012-17
Contact details of provider: Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
Fax: 44-1206-873151
Web page: https://www.iser.essex.ac.uk/
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  1. Heathcote, Jonathan & Perri, Fabrizio & Violante, Giovanni L, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," CEPR Discussion Papers 7538, C.E.P.R. Discussion Papers.
  2. Anna Fräßdorf & Markus Grabka & Johannes Schwarze, 2011. "The impact of household capital income on income inequality—a factor decomposition analysis for the UK, Germany and the USA," Journal of Economic Inequality, Springer, vol. 9(1), pages 35-56, March.
  3. repec:ese:iserwp:2012-08 is not listed on IDEAS
  4. A Gosling & Stephen Machin, 1995. "The Changing Distribution of Male Wages in the UK," CEP Discussion Papers dp0271, Centre for Economic Performance, LSE.
  5. Frank A Cowell & Carlo V. Fiorio, 2009. "Inequality Decomposition - A Reconciliation," STICERD - Distributional Analysis Research Programme Papers 100, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-87, January.
  7. 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.
  8. Prasad, Eswar, 2002. "Wage Inequality in the United Kingdom, 1975-99," IZA Discussion Papers 510, Institute for the Study of Labor (IZA).
  9. Stephen Jenkins & Philippe Kerm, 2005. "Accounting for income distribution trends: A density function decomposition approach," Journal of Economic Inequality, Springer, vol. 3(1), pages 43-61, April.
  10. Thomas Lemieux, 2007. "The Changing Nature of Wage Inequality," NBER Working Papers 13523, National Bureau of Economic Research, Inc.
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  12. Maarten Goos & Alan Manning, 2007. "Lousy and Lovely Jobs: The Rising Polarization of Work in Britain," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 118-133, February.
  13. Tom Clark & Andrew Leicester, 2004. "Inequality and two decades of British tax and benefit reform," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 129-158, June.
  14. L. Rachel Ngai, 2012. "Comment," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 47 - 52.
  15. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  16. Reed, Deborah & Cancian, Maria, 2001. "Sources of Inequality: Measuring the Contributions of Income Sources to Rising Family Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(3), pages 321-33, September.
  17. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
  18. Myeong-Su Yun, 2006. "Earnings Inequality In Usa, 1969-99: Comparing Inequality Using Earnings Equations," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 127-144, 03.
  19. Gregg, Paul & Waldfogel, Jane & Washbrook, Elizabeth, 2006. "Family expenditures post-welfare reform in the UK: Are low-income families starting to catch up?," Labour Economics, Elsevier, vol. 13(6), pages 721-746, December.
  20. Stephen Machin & John Van Reenen, 2007. "Changes in wage inequality," LSE Research Online Documents on Economics 4667, London School of Economics and Political Science, LSE Library.
  21. 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.
  22. 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.
  23. Carlo Fiorio & Stephen Jenkins, 2007. "Regression-based inequality decomposition," United Kingdom Stata Users' Group Meetings 2007 03, Stata Users Group.
  24. Stuart Adam & James Browne, 2010. "Redistribution, work incentives and thirty years of UK tax and benefit reform," IFS Working Papers W10/24, Institute for Fiscal Studies.
  25. Richard Blundell & Ben Etheridge, 2010. "Consumption, Income and Earnings Inequality in Britain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 76-102, January.
  26. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
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