We study household income inequality in both Great Britain and the United States and the interplay between labour market earnings and the tax system. While both Britain and the US have witnessed secular increases in 90/10 male earnings inequality over the last three decades, this measure of inequality in net family income has declined in Britain while it has risen in the US. To better understand these comparisons, we examine the interaction between labour market earnings in the family, assortative mating, the tax and welfare-benefit system and household income inequality. We find that both countries have witnessed sizeable changes in employment which have primarily occurred on the extensive margin in the US and on the intensive margin in Britain. Increases in the generosity of the welfare system in Britain played a key role in equalizing net income growth across the wage distribution, whereas the relatively weak safety net available to non-workers in the US mean this growing group has seen particularly adverse developments in their net incomes.
|Number of pages||15|
|Journal||Journal of Public Economics|
|State||Published - Jun 2018|
Bibliographical noteFunding Information:
Prepared for the Special Issue of the Journal of Pubic Economics to honour the contributions of Tony Atkinson. We thank the editor and anonymous referees for their helpful comments. Data from the UK Households Below Average Income dataset and Family Resources Survey were made available by the Department for Work and Pensions. These data are available from the UK Data Archive (see Goodman and Webb, 1995 and Department for Work and Pensions, 2017 ). The Labour Force Survey is produced by the Office for National Statistics, and these data are available from the UK data archive. Support from the UK Economic and Social Research Council through the Centre for the Microeconomic Analysis of Public Policy (CPP) at IFS, grant reference ES/M010147/1 , is gratefully acknowledged. Any errors and all views expressed are those of the authors.
© 2018 The Authors
- Family income
ASJC Scopus subject areas
- Economics and Econometrics