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Book part
Publication date: 15 December 2004

Ryoichi Sakano

In an economy with a developed financial system, wages and salaries are not the only source of income for households. Capital markets allow households to invest their…

Abstract

In an economy with a developed financial system, wages and salaries are not the only source of income for households. Capital markets allow households to invest their saving and earn interest and return. An accumulation of wealth is greater for households with higher incomes, who then earn more interest and returns from their wealth, leading to more inequality of income among households. The recent financial crisis experienced in Japan, characterized by a substantial decrease in stock and real estate prices, should have had a reversing effect on the income distribution among Japanese households. Time-series data of quintile income shares and a measure of income inequality in Japan are used to analyze the effects of the financial bubble of the late 1980s and the financial crisis of the 1990s on the income distribution in Japan. The result reveals a significant de-equalizing effect of rising asset prices on income distribution in Japan. However, the equalizing effect of the falling prices of stocks and real estate was partially offset by the de-equalizing effect of rising unemployment in the late 1990s. Furthermore, taking into account the effect of the financial market condition, the income distribution fluctuates less pro-cyclically than previous studies indicated.

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Studies on Economic Well-Being: Essays in the Honor of John P. Formby
Type: Book
ISBN: 978-0-76231-136-1

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Book part
Publication date: 30 September 2014

Vanesa Jordá, José María Sarabia and Faustino Prieto

This paper aims to estimate the global income distribution during the nineties using limited information. In a first stage, we obtain national income distributions

Abstract

This paper aims to estimate the global income distribution during the nineties using limited information. In a first stage, we obtain national income distributions considering a model with two parameters. In particular, we propose to use the so-called Lamé distributions, which are curved versions of the Sigh-Maddala and Dagum distributions. The main feature of this family is that they represent parsimonious models which can fit income data adequately with just two parameters and whose Lorenz curves are characterized by only one parameter. In a second stage, global and regional distributions are derived from a finite mixture of these families using population shares. We test the validity of the model, comparing it with other two-parameter families. Our estimates of different inequality measures suggest that global inequality presents a decreasing pattern mainly driven by the fall of the differences across countries during the course of the study period that offsets the increase in disparities within countries.

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Economic Well-Being and Inequality: Papers from the Fifth ECINEQ Meeting
Type: Book
ISBN: 978-1-78350-556-2

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Abstract

“Economics is a Serious Subject.” Edwin Cannan.

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Wisconsin, Labor, Income, and Institutions: Contributions from Commons and Bronfenbrenner
Type: Book
ISBN: 978-1-78052-010-0

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Book part
Publication date: 26 August 2015

Markus Jäntti, Eva M. Sierminska and Philippe Van Kerm

This paper considers a parametric model for the joint distribution of income and wealth. The model is used to analyze income and wealth inequality in five OECD countries…

Abstract

This paper considers a parametric model for the joint distribution of income and wealth. The model is used to analyze income and wealth inequality in five OECD countries using comparable household-level survey data. We focus on the dependence parameter between the two variables and study whether accounting for wealth and income jointly reveals a different pattern of social inequality than the traditional “income only” approach. We find that cross-country variations in the dependence parameter effectively account only for a small fraction of cross-country differences in a bivariate measure of inequality. The index appears primarily driven by differences in inequality in the wealth distribution.

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Measurement of Poverty, Deprivation, and Economic Mobility
Type: Book
ISBN: 978-1-78560-386-0

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Article
Publication date: 26 July 2013

Roberta Adami, Orla Gough and Angeliki Theophilopoulou

The purpose of this paper is to investigate how changes in the distribution of pre retirement labour earnings affect post‐retirement income in the UK.

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Abstract

Purpose

The purpose of this paper is to investigate how changes in the distribution of pre retirement labour earnings affect post‐retirement income in the UK.

Design/methodology/approach

The authors estimate a PROBIT model and perform a counterfactual simulation to assess the effects of changes in the earnings distributions on pensions in the UK. The paper uses data from the British Household Panel Survey (BHPS).

Findings

The distribution of labour earnings before retirement plays a considerable role in the pension distribution of current retirees, particularly for low and medium incomes in the period 1991‐2007 for the UK. Improvements in Social Security have lifted many out of poverty; however there is still a gender gap as it is found that the current system of public and private schemes has not substantially improved pension income dispersion among women. On the other hand, changes in labour earning distributions have benefited more poor female pensioners than male.

Originality/value

The paper uses BHPS data, which is a longitudinal panel of survey questions made to UK households between 1991 and 2007. The level of detail of such data allows the study of the complete distributions of pre and post retirement income rather than focussing only on some measures of dispersion.

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Journal of Economic Studies, vol. 40 no. 3
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 20 May 2005

Robert S. Goldfarb and Thomas C. Leonard

Distribution concerns who gets what. But does “who” refer to the personal distribution of income among individuals or the functional distribution of income among suppliers…

Abstract

Distribution concerns who gets what. But does “who” refer to the personal distribution of income among individuals or the functional distribution of income among suppliers of productive factors? For nearly 150 years, Anglophone distribution theory followed the Ricardian emphasis on functional distribution – the income shares of labor, land, and capital. Only beginning in the 1960s, and consolidated by a research outpouring in the early 1970s, does mainstream economics turn to the personal conception of distribution. This essay documents Anglophone (primarily American) economics’ move from functional to personal distribution, and tries to illuminate something of its causes and timing.

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A Research Annual
Type: Book
ISBN: 978-1-84950-316-7

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Book part
Publication date: 28 December 2018

Aboozar Hadavand

This chapter focuses on an important aspect of economic inequality – the question of how people perceive inequality and whether these perceptions deviate in any meaningful…

Abstract

This chapter focuses on an important aspect of economic inequality – the question of how people perceive inequality and whether these perceptions deviate in any meaningful way from statistical measures of inequality. Using a novel approach, the author investigates whether individuals across different countries are able to correctly estimate the shape of income distribution of the country where they reside. The author further investigates whether individuals have the distribution of a particular reference group in mind when they answer questions on inequality. The author finds that perceptions of inequality are frequently shaped by reference groups such as those formed according to educational attainment, age, and gender.

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Inequality, Taxation and Intergenerational Transmission
Type: Book
ISBN: 978-1-78756-458-9

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Book part
Publication date: 30 September 2014

Francisco Azpitarte and Olga Alonso-Villar

This paper introduces a unit-consistent Lorenz dominance criterion that allows ranking income distributions according to centrist measures à la Seidl and Pfingsten (1997)…

Abstract

This paper introduces a unit-consistent Lorenz dominance criterion that allows ranking income distributions according to centrist measures à la Seidl and Pfingsten (1997). In doing so, it defines α-Lorenz curves that generalize the absolute Lorenz curve. These curves allow implementing unanimous rankings for a broad set of centrist inequality notions, whereas they become closer and closer to the absolute curve when α approaches equity. In addition, this paper provides an empirical illustration of these tools using Australian income data. The results suggest that despite the reduction of relative inequality for Australian-born people between 1999 and 2003, their inequality increased for most centrist value judgments.

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Economic Well-Being and Inequality: Papers from the Fifth ECINEQ Meeting
Type: Book
ISBN: 978-1-78350-556-2

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Book part
Publication date: 14 July 2006

Duangkamon Chotikapanich and William E. Griffiths

Hypothesis tests for dominance in income distributions has received considerable attention in recent literature. See, for example, Barrett and Donald (2003a, b), Davidson…

Abstract

Hypothesis tests for dominance in income distributions has received considerable attention in recent literature. See, for example, Barrett and Donald (2003a, b), Davidson and Duclos (2000) and references therein. Such tests are useful for assessing progress towards eliminating poverty and for evaluating the effectiveness of various policy initiatives directed towards welfare improvement. To date the focus in the literature has been on sampling theory tests. Such tests can be set up in various ways, with dominance as the null or alternative hypothesis, and with dominance in either direction (X dominates Y or Y dominates X). The result of a test is expressed as rejection of, or failure to reject, a null hypothesis. In this paper, we develop and apply Bayesian methods of inference to problems of Lorenz and stochastic dominance. The result from a comparison of two income distributions is reported in terms of the posterior probabilities for each of the three possible outcomes: (a) X dominates Y, (b) Y dominates X, and (c) neither X nor Y is dominant. Reporting results about uncertain outcomes in terms of probabilities has the advantage of being more informative than a simple reject/do-not-reject outcome. Whether a probability is sufficiently high or low for a policy maker to take a particular action is then a decision for that policy maker.

The methodology is applied to data for Canada from the Family Expenditure Survey for the years 1978 and 1986. We assess the likelihood of dominance from one time period to the next. Two alternative assumptions are made about the income distributions – Dagum and Singh-Maddala – and in each case the posterior probability of dominance is given by the proportion of times a relevant parameter inequality is satisfied by the posterior observations generated by Markov chain Monte Carlo.

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Dynamics of Inequality and Poverty
Type: Book
ISBN: 978-0-76231-350-1

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Article
Publication date: 12 May 2021

Francesco Bloise, Maurizio Franzini and Michele Raitano

The authors analyse how the association between parental background and adult children's earnings changes when net rather than gross children's earnings are considered and…

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Abstract

Purpose

The authors analyse how the association between parental background and adult children's earnings changes when net rather than gross children's earnings are considered and disentangle what such changes depend on: differences between pre and after taxes earnings inequality or reranking of individuals along the earnings distribution before and after taxes.

Design/methodology/approach

Using data from European Union Statistics on Income and Living Conditions (EU-SILC) 2011, the authors focus on two large European countries, Italy and Poland, with comparable levels of inequality and background-related earnings premia but very different personal income tax (PIT) design and estimate – at both the mean and the deciles of the earnings distribution – the association between parents' characteristics and children's gross and net earnings.

Findings

The authors find that in Italy the PIT reduces the magnitude of the association between parental background and adult children's earnings at the top of the distribution, while no effects emerge for Poland, and the reduction is mostly due to a decrease in earnings inequality rather than to a re-ranking of children along the distribution. The findings are confirmed when the authors simulate the introduction of a “quasi flat tax” regime in Italy.

Social implications

The findings suggest that the higher the tax progressivity, the higher the background-related inequality reduction and the lower the intergenerational association, signalling that the degree of progressivity amongst children may be an effective weapon to reduce intergenerational inequality.

Originality/value

In the literature on intergenerational inequality, the role of taxes is usually overlooked. In this paper, the authors try to fill this gap and enquire how the PIT design affects the association between parental background and adult children's earnings.

Details

International Journal of Manpower, vol. 42 no. 8
Type: Research Article
ISSN: 0143-7720

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