Demographic or labour market trends [E-Book]: What determines the distribution of household earnings in OECD countries? / Wen-Hao Chen, Michael Förster and Ana Llena-Nozal
Chen, Wen-Hao .
Förster, Michael. / Llena-Nozal, Ana.
Paris : OECD Publishing, 2014
29 p.
Full Text
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.