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Demographic or labour market trends: What determines the distribution of household earnings in OECD countries?

Author

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  • Wen-Hao Chen
  • Michael Förster
  • Ana Llena-Nozal
Abstract
This article assesses various underlying driving factors for the evolution of household earnings inequality for 23 OECD countries from the mid-1980s to the mid-2000s. There are a number of factors at play. Some are related to labour market trends – increasing dispersion of individual wages and changes in men’s and women’s employment rates. Others relate to shifts in household structures and family formation – more single-headed households and increased earnings correlation among partners in couples. The contribution of each of these factors is estimated using a semi parametric decomposition technique. The results reveal that marital sorting and household structure changes contributed, albeit moderately, to increasing household earnings inequality, while rising women’s employment exerted a sizable equalising effect. However, changes in labour market factors, in particular increases in men’s earnings disparities, were identified as the main driver of household earnings inequality, contributing between one-third and one-half to the overall increase in most countries. Sensitivity analysis applying a reversedorder decomposition suggests that these results are robust.

Suggested Citation

  • Wen-Hao Chen & Michael Förster & Ana Llena-Nozal, 2014. "Demographic or labour market trends: What determines the distribution of household earnings in OECD countries?," OECD Journal: Economic Studies, OECD Publishing, vol. 2013(1), pages 179-207.
  • Handle: RePEc:oec:ecokac:5k43jt5vcdvl
    DOI: 10.1787/eco_studies-2013-5k43jt5vcdvl
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    Cited by:

    1. Leo Azzollini & Richard Breen & Brian Nolan, 2023. "Demographic behaviour and earnings inequality across OECD countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 441-461, June.
    2. Shoshana Grossbard & Lucia Mangiavacchi & William Nilsson & Luca Piccoli, 2022. "Spouses’ earnings association and inequality: A non-linear perspective," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(3), pages 611-638, September.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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