The impact of demographic and family structure changes on income distribution in Hungary and OECD countries

Abstract

This paper analyses the impact of socio-demographic trends on income inequality over the past two to three decades. The main socio-demographic trends in Hungary were largely in line with OECD-wide changes. Family structures are becoming increasingly complex and there is a growing disconnect between nuclear families and households. There has been a general retreat from marriage and a growth in both cohabitation and multigenerational households, as well as in the share of single person households. Births outside of marriage increased as well as the share of children living in other than two-parent family structures, and the number of children per household decreased. These changes in family structure fed into the broader cross-sectional development of ageing populations. However, most of these demographic changes had only a modest (upward) impact on trends in income inequality. In Hungary, three of the examined trends had a more significant impact than in other OECD countries: assortative mating; decline in the number of children; and changes in household types taken together. The inequality impact was typically larger on market than on disposable incomes, highlighting the strong inequality mitigating effect of the tax-benefit systems.