Annual Income Inequality Research Articles

New Evidence on the Relationship between Inequality and Health

The relative income hypothesis suggests that an individual’s health is impacted by the income of others. However, prior studies suffer from mixed empirical findings that could be due to a lack of annual individual income data with sufficient sample size. We apply a new methodology to calculate a variety of income inequality measures based on aggregate income and household size data from various Federal data sources. Our proposed methodology provides a way to express various income inequality measures as a function of the ratio of mean to median household income under the assumption that individual income is log-Normally distributed. This approach produces a variety of precise annual income inequality measures at different levels of geography, thus solving the sample size problem by incorporating externally calculated inequality measures. Combining the 2001-2012 editions of the U.S. Behavioral Risk Factor Surveillance System with annual regional income inequality measures derived from our methodology enables us to estimate both the contemporaneous and the lagged effect of income inequality on individual health outcomes. In general, we find statistically significant evidence supporting the income inequality hypothesis and the relative deprivation hypothesis, which suggests that greater income inequality adversely affects health status in the United States.

Income inequality and mobility of rural households in China from 2003 to 2006

Purpose– This paper aims to illustrate the trends of income growth and income inequality and examines the dynamics and determinants of income mobility in rural China from 2003 to 2006.Design/methodology/approach– The authors decomposed the Gini coefficient by different sources and analyzed income mobility using the method of income transition matrix. The authors then estimated the effects of demographic variables, labor migration, and other household characteristics on income growth using a dynamic panel data model.Findings– The study obtained important findings on income mobility and income inequality in rural China. First, annual income inequality in rural China was smoothed during this period after a decline from 2003, with the largest contribution from the income of migration work. Second, income mobility remained rather stable and relatively high, with higher mobility in the interior provinces than in the coastal provinces. Third, the income levels of the poor and the wealthy households converged during this period after controlling other factors. Fourth, income growth depends on in the households' demographic composition, their human capital accumulation, and their chances of getting migration jobs.Originality/value– The sound econometric methods applied to the most current rural household survey data provide important contributions to the literature of income inequality and income mobility in China.

Demographic Dividends Revisited

This paper revisits demographic dividend issues after almost 2 decades of debate. In 1998, David Bloom and I used a convergence model to estimate the impact of demographic-transition-driven age structure effects and calculated what the literature has come to call the “demographic dividend.” These early estimates seem to be similar to those coming from more recent overlapping generation models, when properly estimated. Research has shown that the demographic dividend is not simply a labor participation rate effect, but also a growth effect. Life-cycle savings, investment deepening, foreign capital flows, and schooling have all been greatly affected by the demographic transition. The paper discusses just how much of these positive growth effects are based on accelerating human capital accumulation induced by demand-side quality–quantity trade-offs versus a co-movement between demographic transitions and public schooling supply-side expansions. Since emigration has been driven in part by demography, it has wasted some of the demographic dividend by brain drain. In addition, within-country rural–urban migrations have also been driven in part by demographic transitions with different spatial timing. Finally, the paper shows how lifetime—not just annual—income inequality has been influenced by demographic transitions.

Income Mobility in Russia (2000-2005)

Although much research has been conducted on annual income inequality in Russia, little has been know about longer-run measures of income inequality and on income mobility. Using the data from the Russian Longitudinal Monitoring Survey, this paper investigates income mobility in Russia during the period of rapid economic growth. Employing a broad set of mobility indices, we show that there is much mobility in household incomes from one year to the next in Russia. There is some evidence of greater mobility for those in the tails of the income distribution relative to the middle. However, income movements in Russia over this period are largely associated with transitory rather than permanent changes.

U.S. Income Inequality and Income Mobility in the 1980s and 1990s

Income inequality has been increasing in the United States over the past 25 years. Many argue that rising inequality is not a serious issue because income or social mobility reduces inequality and increases well-being. These observers point to studies showing considerable upward mobility. This study examines income mobility and its relation to income inequality. The results show that while there is considerable income mobility, it is generally not far - rags to riches success stories are fairly rare. Furthermore, income mobility has a disequalizing effect on annual income inequality, but has a small equalizing effect on inequality of longer-term incomes.

Income mobility of individuals in China and the United States

AbstractAlthough much has been written about annual income inequality in China, little research has been conducted on longer‐run measures of income inequality and on income mobility. This paper compares income mobility of urban individuals in China and the United States in the 1990s. The following questions are taken up: To what extent are measures of annual income inequality misleading indicators of long‐run income inequality? How much income mobility was there in China in the first half of the 1990s and how did this compare with mobility in other countries? Have real income increases been greater for the poor or the rich? How important is the variation in permanent incomes in China and how has this changed?

Income Mobility of Individuals in China and the United States

Though much has been written about annual income inequality in China, little research has been conducted on longer run measures of income inequality and on income mobility. This paper compares income mobility of urban individuals in China and the United States in the 1990s. The following questions are taken up. To what extent are measures of annual income inequality misleading indicators of long-run income inequality? How much income mobility was there in China in the first half of the 1990s and how did this compare with mobility in other countries? Have real income increases been greater for the poor or the rich? How important is the variation in permanent incomes in China and how has this changed?

Income Mobility, Inequality and Social Welfare

It is often argued that an observation of rising annual income inequality need not have negative normative implications. The argument is that if there has been a sufficiently large simultaneous increase in mobility, the inequality of income measured over a longer time period can be lower despite the rise in annual inequality. In this paper, it is shown by example that if normative implications are drawn from a standard social welfare function, the set of circumstances put forward in the above argument are not sufficient to guarantee that social welfare will improve. The reason is that even though rising mobility does reduce longer term inequality, it also increases the variability of income profiles over time and the latter has a detrimental social welfare effect. Hence, there are two types of mobility: one which reduces inequality (regression to the mean), but another that increases inequality (relative movements uncorrelated with incomes). Further, if individuals’ aversion to income variabiltiy is sufficiently larger than the social welfare judge’s aversion to inequality, then an increase in mobility, no matter how large, cannot offset the negative normative effect of rising annual inequality.

The Impact of Pension Benefits on the Distribution of Earned Income

Using standard measures of income inequality and detailed pension benefit information on participants in the 1983 Survey of Consumer Finances (SCF), the authors investigate how pension benefits affected the distribution of earned income. The results suggest that private pensions increased annual income inequality (relative to inequality observed in the distribution of wage income) by only about 2% among all employed individuals, but by 21% among unionized workers. Further analysis indicates that private pensions raised annual income inequality primarily by increasing the rate of return to tenure, possibly through pension “backloading” (setting accruals to grow when earnings rise near retirement) and the increasing incidence of pensions with age. Private pensions had little effect on estimates of the distribution of expected lifetime income, but the addition to the analysis of social security benefits (public pensions) strongly reduced inequality in that distribution.

Lifetime income distribution: households versus individuals

Equivalent lifetime income is more equally distributed than individual (non-equivalent) lifetime income. The assumption that lifetime income inequality is smaller than the annual income inequality is confirmed by our results. However, the difference between both appears to be rather small, in particular with respect to the older generations.