28 December 2011

Divided We Stand: why inequality keeps rising

This is a paid for report from the OECD though there is a free summary as well as free data that the report builds on.

Click here to go to the OECD webpage.

From the summary report - An Overview of Growing Income Inequalities in OECD Countries: Main Findings - the most interesting thing for me was the causal model that the OECD authors developed to understand the changes in economic inequalities on page 27 (see image below).

"The first pathway goes through the impact on labour earnings inequality – from the dark blue to light blue shaded boxes. Earnings inequality in this framework is assessed in terms of both wage dispersion among workers and individual earnings dispersion among the whole working-age population, which takes into account under-employment and inactivity.

The second pathway is the transmission of labour earnings inequalities to household income inequalities – the move from the light blue to the unshaded boxes. This pathway involves several steps, which takes into account the importance of earnings dispersion together with other factors (e.g. changes in household structure and the influence of other income sources).

The third pathway is the one to final household disposable and adjusted disposable income – from the unshaded to the grey shaded boxes. This pathway takes into account the impact of taxes and transfers, both cash and in-kind."