Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/247237
Year of Publication: 
2020
Series/Report no.: 
LIS Working Paper Series No. 802
Publisher: 
Luxembourg Income Study (LIS), Luxembourg
Abstract: 
Despite rising interest in income inequality, scholars remain divided over the mechanisms underlying inclusive income growth and how these mechanisms vary across countries. This study introduces the concept of national growth profiles, the additive contribution of changes in taxes, transfers, composition, and other factors including market institutions to changes across a country's income distribution. We present a decomposition framework to measure national growth profiles for eight high-income countries from the 1980- 2010s. Our findings adjudicate competing sociological and economic perspectives on rising inequality. First, we find that policy-driven changes in taxes and transfers are the dominant drivers of inclusive growth at the tails of the income distributions. Second, rising educational attainment contributes most to income growth across the distribution, but consistently contributes to less-inclusive growth. When changes in education are considered, changes in assortative mating and single parenthood have little consequence for changes in inequality. Third, changes to other factors including market institutions increased inequality in countries such as the U.S., but less so in France and Germany. Had the U.S. matched the changes to Dutch tax policy, Danish transfer policy, or other factors of most other countries, it could have achieved more inclusive income growth than observed.
Subjects: 
income inequality
inclusive growth
welfare state
labor markets
social policy
Document Type: 
Working Paper

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