Working Paper: NBER ID: w0668
Authors: Reuben Gronau
Abstract: Recent decades have witnessed a sharp increase in the labor force participation of married women. The paper investigates the effect of wives' earnings on family income distribution. This effect depends on the in-equality of women's earnings as compared with other sources of income, on the correlation between the two and on the woman's share in total income. These in turn depend on participation patterns, labor supply and sex related wage differentials. In general, only the correlation between the various sources of income has an unambiguous effect on inequality, the effects of the other factors depending on the specific values of the parameters. In Israel where there are sharp differences in participation rates of married women and in sex related earnings differentials by schooling group, wives' earnings reduce total family income inequality, increasing at the same time the between-group (ethnic and schooling group) variability. The paper examines the effect of changes in the participation rate and the wife-husband earnings gap on family income inequality. It compares the effect of wives' earnings with other income sources (e.g., transfers) and examines the implication of separate tax returns for inequality.
Keywords: Labor Force Participation; Wage Differentials; Income Inequality; Family Income; Israel
JEL Codes: J16; J31; I32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wives' earnings (J31) | family income inequality (D31) |
| increase in wives' earnings (J31) | decline in within-group variation (C92) |
| decline in within-group variation (C92) | reduce total family income inequality (D31) |
| increase in wives' earnings (J31) | more positive correlation between husbands' and wives' earnings (J31) |
| more positive correlation between husbands' and wives' earnings (J31) | enhance income inequality (D31) |
| negative correlation between husbands' and wives' earnings (J31) | reduce inequality (I24) |
| Israeli tax structure (H29) | neutralizes distributional effect of wives' earnings (D13) |
| neutralizes distributional effect of wives' earnings (D13) | regressive influence on family income distribution (D31) |