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Income inequality and the labour market in Britain and the US

Author

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  • Richard Blundell

    (Institute for Fiscal Studies and University College London)

  • Robert Joyce

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Agnes Norris Keiller

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • James P. Ziliak

    (Institute for Fiscal Studies and University of Kentucky)

Abstract

We study household income inequality in both Great Britain and the United States and the interplay between labour market earnings and the tax system. While both Britain and the US have witnessed secular increases in 90/10 male earnings inequality over the last three decades, this measure of inequality in net family has declined in Britain while it has risen in the US. We examine the interaction between labour market earnings in the family, assortative mating, the tax and benefit system and household income inequality. We find that both countries have witnessed sizeable changes in employment which have primarily occurred on the extensive margin in the US and on the intensive margin in Britain. Increases in the generosity of the welfare system in Britain played a key role in equalizing net income growth across the wage distribution whereas the relatively weak safety net available to non-workers in the US mean this growing group has seen particularly adverse developments in their net incomes. An updated version of this working paper can be accessed here.

Suggested Citation

  • Richard Blundell & Robert Joyce & Agnes Norris Keiller & James P. Ziliak, 2017. "Income inequality and the labour market in Britain and the US," IFS Working Papers W17/25, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:17/25
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    References listed on IDEAS

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    Keywords

    inequality; labour market; earnings; tax;
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