Working Paper: NBER ID: w4754
Authors: McKinley L. Blackburn; David B. Bloom
Abstract: We examine the detailed structure of family income inequality in the United States, Canada, and Australia at various points during the 1980s. In each of these countries we find that income inequality increased among married couple families and that the increases are closely associated with increases in the inequality of husbands' earnings. However, only in the United States is the increased inequality of husbands' earnings also associated with an increase in education-earnings differentials. In addition, increased earnings inequality is associated with increases in both the variance of wages and the variance of labor supply in the United States and Canada, but only with an increase in the variance of labor supply in Australia. Evidence of an increase in married-couple income inequality is found for France and the United Kingdom, but not for Sweden or the Netherlands. For married couple families in Canada, Sweden, the United Kingdom, and the United States, we find that increased inequality of family income is closely associated with an increased correlation between husbands' and wives' earnings. A more detailed examination of this correlation in Canada and the United States suggests that the increase in this correlation cannot be explained by an increase in the similarity of husbands' and wives' observable labor market characteristics in either country. Rather, it is explained partly by changes in the way those characteristics translate into labor market outcomes and, more important, by changes in the interspousal correlation between unobservable factors that influence labor market outcomes.
Keywords: Family Income Inequality; Labor Market; Economic Structure
JEL Codes: J31; D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased family income inequality (D31) | increase in the correlation between husbands' and wives' earnings (J31) |
| increase in the correlation between husbands' and wives' earnings (J31) | attributed to changes in observable characteristics of husbands and wives (J12) |
| increase in the correlation between husbands' and wives' earnings (J31) | attributed to changes in regression weights of these characteristics (C29) |
| increased income inequality among married couples (D31) | changes in labor supply behavior of husbands and wives (J29) |
| increase in family income inequality (D31) | influenced by factors other than changes in the distribution of earnings among husbands (D33) |