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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 twentieth century. We decompose inequality for six countries (Canada, Germany, Norway, Sweden, the U.K., and the U.S.) 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 force behind recent trends, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings which 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.
This paper presents a model of self-fulfilling expectations by firms and households which generates multiplicity of equilibria in pay and housework time allocation for ex-ante identical spouses. Multiplicity arises from statistical discrimination exerted by firms in the provision of paid-for training to workers, rather than from incentive problems in the labor market. Employers' beliefs about differences in spouses' reactions to housework shocks lead to symmetric (ungendered) and asymmetric (gendered) equilibria. We find that: (1) the ungendered equilibrium tends to prevail as aggregate productivity in the economy increases (regardless of the generosity of family aid policies), (2) the ungendered equilibrium could yield higher welfare under some scenarios, and (3) gender-neutral job subsidies are more effective that gender-targeted ones in removing the gendered equilibrium.
This paper examines the possible reform of the system of aid to dependent individuals (apa), a reform aimed at recovering the subsidies awarded from the individual?s bequest. We develop a theoretical model with a dependent parent and an offspring that can potentially act as informal carer. The parent decides how much formal aid to buy, while the offspring decides how much informal care to provide to her parent. The model is solved for three cases: no altruism, altruism from bequests (towards a surviving spouse or offspring), and altruism towards the parent. We show that recovering the subsidy from the bequest increases the amount of informal aid supplied by a non-altruist offspring, while the versions with altruism yield ambiguous results. Classification JEL : D11, D3
We examine how changes in tax policies affect the dynamics of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowment. The endogeneity of the labor supply plays a crucial role in determining inequality, as tax changes that affect hours of work will affect the distribution of wealth and income, reinforcing or offsetting the direct redistributive impact of taxes. Our results indicate that tax policies that reduce the labor supply are associated with lower output but also with a more equal distribution of after-tax income. We illustrate these effects by examining the impact of recent tax changes observed in the US and in European economies.
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A large literature has studied the impact of labour market institutions on wage inequality, but their effect on income inequality has received little attention. This paper argues that personal income inequality depends on the wage differential, the labour share and the unemployment rate. Labour market institutions affect income inequality through these three channels, and their overall effect is theoretically ambiguous. We use a panel of OECD countries for the period 1960-2000 to examine these effects. We find that greater unionization and greater wage bargaining coordination have opposite effects on inequality, implying conflicting effects of greater union presence on income inequality. Copyright (c) The London School of Economics and Political Science 2009.
No abstract is available for this item.
No abstract is available for this item.
No abstract is available for this item.
No abstract is available for this item.