INDEX

Note: Page numbers followed by b indicate boxes, f indicate figures and t indicate tables.

A Antipoverty agenda, 886

Absolute bipolarization indices, 335–336 Antipoverty policy
Absolute income hypothesis, 1502–1504 distributive justice, 1969–1970
Absolute inequality, 739–740 economic crisis, 2120–2126
Absolute poverty, 607–608, 609–610, 788t, 789 economic development, 1968–1969
Accountable effort, 230, 283 first poverty enlightenment, 1979–1984
Accumulation model, 1468 generic issues, 2028–2031
Active labor market policies (ALMP), 1620, health and education, 1985
2112–2116 information campaigns, 2043
Actual vs. counterfactual indexation, 2164 microfinance schemes, 2040–2041
Administrative tax registers, 858 moral weaknesses, 1984–1985
Agglomeration economies, 1848, 1867 philosophical and economic thinking, 1970
Aggregate deprivation, 1156 policy incentives, schooling, 2037–2039
Aggregate inherited wealth, 1327, 1331 poor-area development programs, 2041–2043
Aggregate welfare, 740–743 Poor Laws, 1985–1987
Aggregator function, xxvii–xxviii progressive market economy, 2010–2018
Agnosticism, 112–113 schooling, 1988–1990, 2034–2037
Aiyagari economy, 1278 second poverty enlightenment, 1994–2010
Aiyagari model, 1242–1246 socialism, 1990–1991
Aiyagari problem, 1279–1280 social research, 1991–1994
Alienation, 342–348 state-contingent transfers, 2031–2032
All the Ginis (ATG) data set, 709–710, 1745 utilitarianism, 1987–1988
ALMP. See Active labor market policies (ALMP) utility of poverty, 1974–1979, 2018–2028
Americans with Disabilities Act (ADA), 1448–1449 wages, 2044
American Time Use survey, 1076 wealth dynamics, 1971–1974
Anchored income poverty rates, 2122, 2124t workfare, 2032–2034
Anchored poverty, 609–610 working class diets, 1984
OECD countries, 617f Arrow’s theorem, 72
vs. relative poverty, 616–619 Asian tax systems, 1875
trends in, 616t Assets, 1240
Anglo-Saxon-style effect, 1860
negative income taxes, 2099–2100 nonfinancial, 513–514
tax credits, 2100 non-state-contingent, 1241
Annual disposable family income, 863 poverty, 607
Annual earnings real, 513–514
dispersion, 1551–1552 ATK. See Atkinson Index (ATK)
distribution, 1537–1538, 1545–1546, 1554f, 1555 Atkinson–Bourguignon utility-of-income function,
full-time employees, 1586t 821
and hourly wages, 1660 Atkinson Index (ATK), 173, 621
Annual labor earnings, 873–874 Australian Time-Use Survey, 1081
Annual Social and Economic Supplement (ASEC), Autarky, 1285, 1285t
2151 Automatic adjustments indicators, 2155–2157

I-1
I-2 Index

B British
Balance sheet adjustment recession, 1859 earnings dispersion, 1580, 1581f
Bankruptcy laws, 1279–1281 earnings inequality, 1580
Bargaining models, 1386–1388 income data, 826, 826f
Bargaining power, xlviii income mobility, 886
shocks, 1260 British Cohort Study (BCS), 897
Bargaining theory, 1387 British Household Panel Survey (BHPS), 858, 1154,
Barro-Lee dataset, 1927 2150
Basic income scheme, 2029–2030 British Industrial Revolution, 477
Basket of goods approach, 2066–2067 British Second Reform Act of 1868, 1897
Bayesian Information Criterion (BIC), 385–386 Budget majorization criterion, 190
Becker’s theory, 1071–1073 Business cycle
Behavioral changes inequality and, 1256–1264
individual reactions, 2167–2169 models, financial market frictions in, 1264
labor supply models, 2169–2172
Behavioral microsimulation, 2201 C
Behavioral tax-benefit mode, 2170, 2170f Canada
Bequest-in-the-utility-function models, earnings decile groups, 913, 914t
1345–1347 earnings dispersion, 1580, 1581f
Better Life Index, 153–154 earnings inequality, 1580
Between-group inequality, 1624–1634, 1625f, intergenerational decile transition matrices, 906,
1626f, 1630b, 1633f 907t
BIC. See Bayesian Information Criterion (BIC) intergenerational earnings mobility, 908, 908t
Big Mac Index, 129–130 Canonical model, 1606–1607
Bipolarization, 304–305 Capability approach, 75–85, 78f, 148–149
extensions, 333–335 aggregation and respect for preferences, 82–85
income polarization and, 332–333 choice of dimensions, 80–82
middle class size measurement, 318–322 freedom, 79, 80
with ordinal data, 336–337 implementation, 81
Bipolarization dominance, 326–328 influential stream within, 82
first-order, 326–328 refined functionings, 79, 80
second-order, 328 researchers and, 80–81, 83
Bipolarization indices, 328–332 responsibility, 78–79
absolute and relative, 335–336 Capital gains, 498–502, 501f, 657
properties, 322–325 income for top 1% share trends, 659f
Bivariate density estimation, nonparametric, top income shares, 658–660
904–905 Capital incomes, 498–502, 499f
Bivariate income distribution, 857–858 Capital-to-labor ratio, 1853
Bootstrap Captured democracy
approach, 418 British Second Reform Act, 1897
confidence intervals, 413–414, 414t, 417t de facto power, 1895
methods, 412–413 de jure constitutional provisions, 1896
semiparametric, 415–416 political system, 1895
Borrowing limits, wealth distribution, 1274–1279, redistributive constraints, 1897
1275t, 1276f taxation, 1896–1897
Brain drain hypothesis, 1870 Cardinal continuous variables, 151
Brain gain hypothesis, 1870 Career interruptions, 1029–1031
Breadwinner model, single-earner, 1536–1537 Case poverty, 2002–2003
 Index I-3

Cash-equivalent, 123 Cobb–Douglas indexes, 130

estimation, 123 Coefficient of democracy, 1920
income and needs, 125f Collective model, 1374–1379, 1405–1406
valuation method, 123–124, 124f Collective model, empirical findings, 1403–1415
Cash public social expenditure, 2081, 2082f first-generation models, 1403, 1404, 1408
Cash transfers, inactive working-age population identification of sharing rule, 1404–1409,
at-risk-of poverty rate, 2090 1413–1415
income drop, 2089 over time and sharing rule, 1409–1410
labor market policies, 2093 revealed preference restrictions, 1413–1415
minimum income protection, 2089 Collective model, identification, 1391–1400
minimum wages, 2092, 2093f Cobb–Douglas example, 1396–1400
MIPI dataset, 2090 comparisons between families, 1400–1401
social safety net, 2090, 2091f under exclusion, 1399–1400
social spending, 2088 general case, 1396, 1398–1399
social transfer spending, 2091–2092 global restrictions, 1395
unemployment benefits, 2088–2089 Hicks’s aggregation theorem, 1392–1393
unemployment/disability insurance, 2088 household demand, 1397–1398
CCTs. See Conditional cash transfer programs local identification, 1393–1394
(CCTs) market equilibrium, 1402
CES. See Constant elasticity of substitution (CES) private goods, 1393–1395
CGE models. See Computable general equilibrium public goods, 1395–1396
(CGE) models result, 1391–1393
Chanakya’s famine relief policy, 1979 sharing rule, 1393–1395
Chartbook of Economic Inequality, 703, 1747 Composite index approach, 158–160
Child Computable general equilibrium (CGE) models,
benefit packages, 2095 746
care, 1667 Conditional cash transfer programs (CCTs),
contingent incomes, 2157, 2165–2166 750–751, 1874
labor, 2036 Conditional density function, 370, 370f
Childcare costs, 1047–1048 Conditional density plots, 829, 830f
Child poverty, 2072, 2180–2181, 2182f Conditional-distribution equality, 285
child cash transfers, 2094–2095 Conditional quantiles, 905, 905f
Child Poverty Act 2010, liv Conditional sharing rule (CSR), 1380
Chow test, 390 Confidence intervals, 417–418
Chronic health problems, 1478 asymptotic, 412
Chronic poverty, 849 bootstrap, 412–413, 415–416, 417
Civil liberties, 220 coverage rate, 413–414, 414t, 417t
Clark, John Bates, 47–48 inequality and poverty measures, 432t
Classical measurement error model, 893 inequality indices with, 362t
Classical theory Conflict, social, 307–308, 354–355
factor prices, 11–12 Consequentialism, 233
profits, 10 Constant elasticity of substitution (CES), 1265
Classification of Individual Consumption by Constant relative risk-aversion (CRRA)
Purpose (COICOP), 2194 preferences, 1238
Class-predicted incomes, 911 Consumer Price Index, 597
Clientele effect, 657 Consumption, 596–597
Cobb–Douglas aggregation, 252 inequality, 705
Cobb–Douglas function, 1248, 1257 poverty, 607, 757, 758f
I-4 Index

Contamination, 437–441 CSR. See Conditional sharing rule (CSR)

concept of robustness, 437–440 Cumulative effects, taxes, 554–557
model estimation, 440–441 Current Population Survey (CPS), 1233
Contingent markets, 1278 Curse of dimensionality problem, 382
Continuous income polarization, 314–317
Counting approach, 146–147 D
association rearrangement, 173–179 Dashboard approach, 143
counting deprivations vs. measuring poverty, Data and descriptive statistics
179–183 dichotomous variable, 1914
deprivation count distribution, 160–161 national income statistics, 1915
dual approach, 167–169 nondemocracy and democracy, 1916–1917, 1916t
independence axioms, 164–167 political institutions, 1914
partial orderings, 161–164 political rights, 1913–1914
Pigou–Dalton principle, 160 Standardized World Inequality Indicators
primal approach, 169–173 Database, 1915–1916
welfare criteria, 160 World Top Incomes Database, 1915
Counting deprivations, 179–183 worldwide average democracy, 1917, 1917f
Country balance sheets, 1308 Data-driven methods, 380
CPS. See Current Population Survey (CPS) Data heterogeneity implications, xxxvii–xxxix
Credit score, 1281–1282 Data on inequality
Credit shock, 1263, 1264f care with data, xxxi–xxxii
Cribsheet, 458 checklist of questions, xxxiv–xxxvii, xxxiv–xxxv,
Cross-country comparisons, 2179–2182 xxxv–xxxvi, xxxix–xli
Cross-country differentials, 1734, 1810t international databases, xxxiii
Cross-country regression techniques, 1860, 1868 relation with national accounts, xxxvi–xxxvii
Cross-country studies source of data, xxxvi
All the Ginis data set, 1745 Data problems
chartbook of economic inequality data, 1747 data contamination, 366–367
Deininger-Squire data set, 1743–1744 incomplete information, 367–368
EU statistics, 1741–1742 measurement error, 366–367
GINI inequality and poverty dataset, 1747 Data reduction technique, 155–156
International Labor Organization database, 1747 Data sources, 364–365
Luxembourg Income Study, 1741 administrative data, 365
OECD data, 1742–1743 comparability, 601–604
PovCal database, 1746 survey data, 365
Sociómetro-BID, 1746 Data splicing method, 1754
strategies, 1739–1740 Data structure
SWIID database, 1748–1749 complex design, 366
TRANS-MONEE database, 1746–1747 simple design, 365–366
University of Texas Inequality Project, 1748 Decile mobility, 867
UNU-WIDER database, 1744–1745 Decision makers, 221, 222
World Development Indicators, 1746 Decision utility vs. experienced utility, 90, 101–102
World Top Incomes Database, 1748 Decomposing static policy effects
WYD data set, 1745–1746 disposable income, 2161
Cross-National Equivalent File (CNEF), 859 end-period income level, 2161
Cross-nationally comparative household panel headcount poverty ratio, 2162–2163
surveys, 888 household income, 2159–2160
Cross-validation (CV), 380–381 hypothetical tax-benefit reforms, 2160
 Index I-5

monetary parameters, 2160–2161 Deprivation, 1155–1156

money-metric policy parameters, 2161–2162 Deterministic neoclassical growth model, 1237
price-indexation, 2163 Developing countries, 700–701
Shorrocks–Shapley approach, 2163–2164 inequality, 706–711
sociodemographic characteristics, 2160 poverty, 792t
tax-benefit models, 2159 DHI. See Disposable household income (DHI)
Defined benefits (DB), 2102–2103 DI. See Disability insurance (DI)
Deininger-Squire data set, 1743–1744 Dictator game, 1164
Democracy Dictionary of Occupational Titles (DOT)
captured, 1895–1897 classifications, 1609–1610
cross-national regressions, 1889 Directional majorization criterion, 190
data and descriptive statistics, 1913–1917 Director’s law, 1888
dependent variable, 1957 Direct unfairness (DU) vs. fairness gap (FG)
disenfranchisement, 1909 approach, 286–288
econometric specification, 1910–1913 Disability Discrimination Act (UK, 1996), 1448–1449
economic and political forces, 1901 Disability insurance (DI), 1449–1451, 1459, 1467,
economic opportunities, 1901 1474
education, 1905–1907 Discrete income polarization, 310–313, 317–318
effect on taxes, 1918–1927 Disposable household income (DHI), 630t, 895
Freedom House index, 1956–1957 distributions, 630–633, 632f
global economy, 1889–1890 vs. household market income, 634t
health outcomes, 1907–1908 Disposable income, 121, 595, 596, 598, 863, 908,
heterogeneity, 1889–1890, 1943–1953 909f, 914, 915t
inequality, 1889, 1904–1905, 1928–1935 Distribution factors, 1377–1378
manufacturing wages, 1955–1956, 1956t, 1957, Distribution matrix, 105–106, 112
1958t Distribution of earnings
market opportunities, 1897–1898 concentration and skewness, 1235t
measures, 1959–1960 U.S. economy, 1233–1235, 1234t
Meltzer-Richard model, 1887–1888 Distribution of wealth, l–liii
middle class bias, 1898–1901 Distributive justice, 37, 43, 47–48, 50–51, 57, 61,
OECD countries, 1887 229, 242, 259–260, 261–262, 268
political system, 1886 Domain-specific deprivation, 155–156
public good provision, 1908–1909 Dominance
redistributive and equalizing effects, 1890–1892 agnosticism on preferences, 112–113
right-wing political party, 1894–1895 indices, 423–425
Rodrik’s data generating model, 1955 multidimensional inequality and, 105–113
secondary school enrollment, 1889 principle, 83, 84f, 104, 423, 444
social mobility, 1894 Dual cut-off approach, 147–148
structural transformation, 1892–1894, 1935–1943 Dual-earner, 1546
taxes and redistribution, 1902–1904 households, 1553
tax revenues, 1888–1889 Dual independence axiom approach, 167–169
voting technology, 1908 Dutch postcode lottery, 1153
welfare expenditures, 1909 Dworkin’s hypothetical insurance market, 224
Density estimation, 369–394 Dynamic bargaining game, 1164
Dependent variable, income inequality Dynamic model
definition, 1750–1751 joint decisions, 1488
reliability, 1752–1755 microsimulation, 2196–2198
variability, 1751–1752 DYNASIM, 2196
I-6 Index

E Earnings inequality theories, 1246–1256,

Earned income tax credit (EITC), 1489–1490, 1606–1612
2088, 2099 human capital investments (see Human capital
Earnings, 1055–1057 investments)
annual labor, 873–874 prices of skills, 1251–1252
distribution, 1540–1561 search and inequality, 1252–1253
elasticity, 912 workers’ choice of occupation, 1254–1256
individual, 856–857 East Asia and Pacific
labor-market experience and, 390, 391f inequality, 727–729
long-run, 917, 918t poverty, 772–774
Mincer equations, 391t Easterlin paradox, 86
mobility, 873, 908, 908t Eastern Europe and Central Asia
negative, 1233 inequality, 729–730
risks, steady-state equilibria, 1285–1286, 1286f poverty, 774–775
stationary theories of, 1241–1246 ECHP. See European Community Household Panel
stochastic representation, 1242 (ECHP) survey
transitory, 886–887 Econometric specification
true, 861 country fixed effects, 1911
volatility, 852 dynamic panel model, 1912–1913
wage, 552–557 forward orthogonal differences, 1912
Earnings dispersion, 1266 GDP ratio, 1910–1911
British, 1580 generalized method of moments, 1912
Canada, 1580, 1581f inequality measures, 1913
Germany, 1580, 1581f mean-reverting dynamics and persistent effects,
United Kingdom, 1580, 1581f 1911
Earnings inequality tax revenue, 1910–1911
Canada, 1582, 1582f Economic consequences, early-life ill-health,
cross-sectional approach, 1643–1648, 1644t, 1466–1468
1646f, 1648f Economic crisis, 1858–1861
decomposition, 1635t Economic determination, health inequality,
effects of institutions on, 1638t 1476–1478
European countries, 1585–1592, 1586f, 1586t, causal effects, 1482–1489
1587t, 1588f, 1589f, 1591f causality tests, 1478–1482
evolution, 1583 reverse causality, 1485
Germany, 1582, 1582f Economic Freedom Index, 1037–1038
Iceland, 1585–1592, 1586f, 1586t, 1587t, 1588f, Economic impact, estimation, 1467
1589f, 1591f Economic inequality, health determination,
labor market, US, 1608 1436–1476, 1499–1500
LMIs and, 1642t absolute income hypothesis, 1502–1504
longitudinal/pseudo-longitudinal approach, cognitive capabilities, 1460–1462
1648–1653, 1649t, 1650f, 1652t, 1655f economic consequences, 1466–1468
Norway, 1585–1592, 1586f, 1586t, 1587t, 1588f, education, 1462–1465
1589f, 1591f empirical challenges, 1504–1505
OECD countries, 1583–1585, 1584f, 1585f fetal origins hypothesis, 1465–1466, 1468
short-run, 1583–1585, 1585f health capabilities, 1460–1462
United Kingdom, 1582, 1582f hypothesis, 1500–1502
United States, 1573–1579, 1575f, 1576f, 1578f, income inequality hypothesis, 1505–1511
1579f, 1585–1592, 1586f, 1586t, 1587t, noncognitive capabilities, 1461–1462
1588f, 1589f, 1591f relative income hypothesis, 1502–1504, 1512
 Index I-7

Economic inheritance flow, 1342 EPL theory. See Employment protection legislation
Economic Opportunity Act of 1964, 2003 (EPL) theory
Economic slowdown, 1859 Equality of opportunity (EOp)
Economic theory, xli–liii dynamics, 256–259
distribution of wealth, l–liii economic development, 248–256
endogenous technological change, xlvi–xlvii empirical analysis, 259–261
race between technology/globalization and empirical validity, 262–266
education, xliif, xli–xliii experiments, 266–270
steady states and transitional dynamics, xliii–xlvi Fleurbaey–Maniquet approach, 243–248
supply and demand, xlviii general approach, 239–243
EDF. See Empirical distribution function (EDF) implementing, 260–261
Edgeworth, Francis Ysidro, 49 life expectancy, 235, 237–238
Education, 2112–2116 model and algorithm, 229–239, 238f, 239f
econometric work, 1906 as multidimensional problem, 273
identification strategy, 1906 as process, 273–274
lagged democracy, 1907 progress report, 270–272
secondary-school gross enrollment rates, 1906 results, 289–294
social spending, 1905–1906 Equal-luck opportunity, 285
spending decisions, 1907 Equal-opportunity theory, 219
sub-Saharan Africa, 1906 Equal sacrifice theories, 54–56
Egalitarian-equivalent approach, 244–245 Equilibrium models, 1388–1390
Egalitarianism, 218, 233, 267–268 Equity vs. economic development, 254
Egalitarian political philosophy, 220–229 Equivalence scales
Egalitarian theory, 218 household, 71, 114–120
EITC. See Earned income tax credit (EITC) noncash income, 126
EKS. See Eltet€ o–K€ oves–Szulc (EKS) Equivalent income approach, 93–95, 95f
Elementary Education Act of 1870, 2035 choice of reference values, 95–97
Elterngeld reform, 1049–1050 concavity failures, 95–97
Eltet€o–K€oves–Szulc (EKS) freedom and responsibility, 98
method, 949–950 with incomplete preferences, 101–103, 103f
quantity indices, 127 revealed preferences method, 99
Empirical distribution function (EDF), 375–376 satisfaction data method, 100–101
Empirical polarization, 353 stated preferences method, 99–100
Empirical validity, EOp, 262–266 Equivalized pretax pretransfer household income,
Employment, 1010–1011 877
Employment Guarantee Schemes (EGSs), 2033 Estimated Household Income Inequality (EHII),
Employment protection legislation (EPL) theory, 704–705
1619–1620, 1666 Ethnicity, 307
Employment rates, United Kingdom, 1545–1546, Euler equation, 1239–1240, 1273
1546f Euler’s theorem, 21
Employment Retirement Income Security Act, 1064 EUROMOD model, 1043–1044, 2147–2148, 2180
Endogenous financial markets, 1279–1281 European antipoverty policy, 2070
Endogenous growth models, 1347 European Community Household Panel (ECHP)
Engel’s Law, 1991 survey, 602–603, 859, 1571, 2069–2070
England’s Poor Laws, 1977–1979 European countries, household employment, 1544,
Entrepreneurial net worth, 1264 1545f
Entropy-type measures of inequality, 1750 European Union Statistics on Income and Living
EOp. See Equality of opportunity (EOp) Conditions (EU-SILC), 859–860,
Episodic luck, 246–247, 284 1741–1742, 2069–2070
I-8 Index

Exchange mobility, 811 Financial constraints, 1274, 1282, 1294

Expenditure switching, 1863 Financial crises, 566, 1859
Experienced utility vs. decision utility, 90, 101–102 Financial development, long-run growth and,
Experimental economics 1282–1283
deservingness, 1166–1167 Financial market
dictator game, 1164 frictions, 1264, 1273
dynamic bargaining game, 1164 heterogeneity, 1287
equal distribution of wages, 1183 imperfections, 1272
Gini coefficient, 1184–1185 inequality and, 1272–1288
grandchild’s income, 1182 and investment possibilities, 1272–1274
hypothetical-choice experiments, 1181 Financial shocks, 1260–1263
hypothetical preferences and neuro evidence, Finite mixture models, density estimation
1167–1170 finite mixture of regressions, 390–392
income distribution models, 1161–1163 group decomposition approach, 383–384
interdependent preferences, 1160–1161 group profiles explanation, 387–389
leaky-bucket experiment, 1182 number of components/groups, 385–387
Lorenz dominance criterion, 1183 Finite sample properties
public-good contributions and punishment, asymptotic methods, 412–413
1164–1166 bootstrap methods, 412–413
Rawlsian maxi-min strategy, 1181 density estimation, 392–394
Robin Hood redistribution, 1184 heavy-tailed distributions, 414–417
social welfare function, 1180 simulation evidence, 413–414
ultimatum game, 1163–1164 Firm-targeted policies, 1037–1040
uniform income range, 1181 First-order dominance, 423–424
Ex post inequality, 1241 First poverty enlightenment
Extended income, 121–122, 2192–2196 balance of trade, 1982
basic income scheme, 1983
F deprivations, 1979–1980
Factor-price national income, 1350–1351, 1350f French Revolution, 1980–1981
Factor prices, 6–16, 508–509 hard-working poor people, 1983–1984
Factor shares determination, 1258–1263 human institutions, 1981
Family annual earnings distribution vs. individual illiteracy, 1983
annual earnings distribution, 1555 local religious organizations, 1982
Family earnings distribution (1980 to 2005), noncompetitive market processes, 1979
Canadian development, 1557 promotional antipoverty policies, 1982–1983
Family-friendly policies, 1036–1037, 1045–1046, redistributive taxation, 1983
1048–1049 social contract approach, 1981
Family income risk, 871 Fiscal devaluation, 2195–2196
Family pay gap, 1031–1033 Fiscal flow, 1339–1340
Family policy instruments, 1044–1048 Fiscal policy, 750
Female-dominated occupations, 1019–1020 Fiscal retrenchment, 1860
Female labor supply, 1029 Fisher price indices, 951
Female-wage differentials, 1864 Fisher quantity index, 127–128
Fetal origins hypothesis, 1465–1466, 1468 Fixed cost approach, 125–126
FGT. See Foster–Greer–Thorbecke (FGT) Fixed effects
Financial accelerator methodology, 1737
and inequality, 1264 models, 1485, 1490, 1505
model, 1264 Fleurbaey–Maniquet approach, 243–248, 262–263
 Index I-9

Flow of Funds balance sheets, 1319–1320 patterns, 1101–1103

Food-for-Education Program, 2037–2038 social norms, 1096–1097
Forecasting, income distribution, 2178 sociological approach, 1095–1096
Foreign direct investment (FDI), 1857 Gender ideology, 1097
Foreign markets, 1868–1869 Gender inequality, 1862–1865
Foster–Greer–Thorbecke (FGT) poverty measure, dimensions, 984, 984f
408–409 division of labor, 1093–1105
Fractionalization (FRAC), 309, 339f, 340 economic well-being, 985–986
France economies of scale, 986–987
long-run inequality, 478–479 gender wage gap, 1005–1050
wealth inequality, 524–526, 525f household-level conceptualization, 983
Freedom House of Polity III, 1905 income measurement, 987–988
French Time Use survey, 1076 income statistics, 985
Frequency-based approach, 154–155 intrahousehold distribution of income, 999–1005
Friedman–Savage theory, 27 intrahousehold finances, 996–999
Frisch–Waugh theorem, 280–281 methodological and empirical issues, 992–993
Full compensation principle, 262–263 neglect of intrahousehold inequality, 1000–1004
Full-gross wage, 1565–1566 nonmarket work/household production,
Full-imputation system, 657, 664–665 1071–1079
Full-time-working single-earner households, nonunitary models of household, 994–996
1546–1547 pensions, 1059–1068
Functional income distribution, 6–16 productive time, 1079–1093
classical theory, 11–12 self-employment, 1050–1059
determinant, 11 socioeconomic approach, 987
development, 36 standard assumptions and assessment, 1004–1005
Marx’s theory, 14–15 statistical approach, 988–991
sophisticated theory, 14 unitary model of household behavior, 991–992
Fuzzy sets approach, 151–152 wealth, 1105–1117
western/industrialized countries, 984
G Gender segregation, labor market
Gallup World Poll, 704, 713–715 occupations and sectors, 1016–1021
Gamma distributions, 374–375 vertical segregation and glass ceiling, 1021–1025
Gastil index, 1903 wage differential, 1013–1016
Gaussian reference distribution, 380 Gender wage gap
GDP. See Gross domestic product (GDP) cross-country differences, 1006–1013
Geary–Allen International Accounts (GAIA), educational level, 1005–1006
950–951 family constraints, 1028–1036
Geary–Khamis (GK) gender segregation, 1013–1025
indices, 128 institutions and policies, 1036–1050
method, 949–950 psychology and social norms, 1025–1028
Gender banking discrimination, 1058–1059 women’s human capital, 1006
Gender-based taxation (GBT), 1043 General equilibrium
Gender-deviance neutralization effect, 1101 and impact of competition, 1268–1269
Gender division of labor theory, 22–23
contexts, 1101–1103 Generalized beta distribution, 374–375
doing gender approach, 1100–1101 Generalized entropy (GE) class, 400–403
economic approach, 1093–1095 Generalized-errors-in-variables (GEIV) model, 893
methodological issues, 1097–1100 Generalized Lorenz curve (GLC), 424
I-10 Index

Generalized sharing rule (GSR), 1380–1381 purchasing power parity exchange rates, 938–939
German Socio-Economic Panel (GSOEP), 858, relative and absolute global inequality, 967–968
1033, 1154 sigma convergence, 944
Germany top income, 948
earnings dispersion, 1580, 1581f within-and between-country components, 941
wage inequality, 1610–1611 Global Entrepreneurship Monitor (GEM),
Gini-based Shorrocks 1052–1053
M index, 882 Global imbalances, 1283–1288
rigidity measure, 874 Global inequality
Gini coefficients (Gini Index), 313, 316–317, 324, alternative estimation, comparison, 959–960
340, 404–406, 628, 707, 707f, 708, 708f, NA means, 960–963
709t, 1585, 1633–1634, 1846–1847, with and without top income data, 955–959
1871–1872, xxii–xxiii Globalization, 548–549, 748–749, 1283, 1284,
absolute and relative, 739–740, 740f 1733–1734
disposable income, 2074–2075, 2076f financial flows, 1848
household income, 621 gender inequality, 1862–1865
market income, 646t international migration, 1869–1872
OECD countries, 634t national and global policy responses, 1873–1876
post-tax/transfer income, 646t remittances, 1869–1872
redistribution, 646t trade openness, 1865–1869
for rich nations, 635–637, 636f Global policy, 1873–1876
vs. top income share, 679–680, 682f Global poverty
top 1% shares changes, 685t, 686t, 687t estimation, 971–973
GINI Inequality and Poverty Database, 1747, 1752 methodology, 968–971
Gini mobility index, 842, 867 Goodness-of-fit test, 375–377
GLC. See Generalized Lorenz curve (GLC) Gossen’s law, 17
Glivenko–Cantelli theorem, 397–398 Government budget constraint, 1891, 1898–1899
Global distribution of income Government revenue, 1922–1924, 1923t, 1924f
beta convergence, 944 Grameen Bank (GB), 2040–2041
between-and within-country inequality, 963–967 Grand inequality regression equation (GIRE), 1734,
China, 943–944 1735–1739
concepts, 943, 943t Granger causality analysis, 1482–1485
egalitarian principles, 940 Great Depression, 1283
estimation, 952–963 Great Gatsby curve, 889, 890f, 917
global inequality, 955–963 Great Recession (GR), 616–619
global poverty, 968–973 Gross domestic product (GDP), 369–370, 369f
household final consumption expenditure, 939 Gross national income (GNI), 700, 719–720
household surveys and national accounts, Gross wages, 1565–1566
945–947 Group-based lending scheme, 2040–2041
international markets, 942 Grouped data, 368
international social arrangements, 940–941 Growth-incidence curve (GIC), 723–725, 724f
market exchange rates, 941–942 Growth-inequality-poverty triangle, 772, 773t
national income, 942 GSR. See Generalized sharing rule (GSR)
occupy movement, 939–940
per capita household income, 938 H
Philippines, 944–945 Hansen overidentification test, 1922, 1928
population unit, 942–943 Happiness economics, 1171
PPP exchange rates, 948–952 Happiness equations, 153–154
 Index I-11

Harrod–Domar–Solow steady-state formula, 1344 causal effects, 1482–1489

Head Start program, 2039 causality tests, 1478–1482
Health reverse causality, 1485
behavior, wealth effects, 1479t, 1483t Heavy-tailed distributions, 414–417
dynamic evolution, 1457 Hecksher–Ohlin (H–O) model, 548–549, 1847
effects on labor market, 1444t, 1445t Hedonic welfarism, 88, 89
gradient in income, 1427 Heterogeneity of income distributions,
and household income, 1470–1471 xxxvii–xxxix
and income, 1422–1423, 1425–1436, 1426f, Heterogeneous firms, 1856
1508t Hicks–Hansen identity for income, 595–596
income inequality to, 1423 Hicks’s aggregation theorem, 1392–1393
multidimensionality, 1437–1438 High-income
and occupation, 1468–1470 countries, 1492–1496, 1501f
and wealth, 1471–1473 economies, 1447, 1473–1474
Health and Retirement Study (HRS), 1443–1447, labor, 1847
1455, 1456, 1472–1473 High top tax rates, 1614
Health and wages, 1437–1447 High-variability economy, 1286
discrimination, 1439–1441 High-wage income earners, 498–499
estimated effects, 1437–1438 Hirschman–Herfindahl index, 340
evidence, 1442–1447 Hirschman’s tunnel effect, 1155
nonpecuniary benefits, 1441–1442 H–O model. See Hecksher–Ohlin (H–O) model
nonwage costs, 1441–1442 Homotheticity (HOM), 194–195
nutrition, 1438, 1439 Horizon effect, 1452
productivity, 1437–1439 Hourly wages
Health and work, 1447–1459 dispersion, 1581f
disability insurance, 1449–1451, 1459 distribution, 1543–1544
evidence, 1453–1459 inequality, 1576f, 1588–1590
incapacity, 1448–1449 percentage changes, 1578f
involuntary unemployment, 1448–1449 rate, 1660
life expectancy, 1452 Household
preferences, 1451–1452 based income tax, 1042–1043
Health-capital model, 1477, 1490 composition effects, 2157
Health determination, economic inequality, decision making model, 1374–1375
1436–1476, 1499–1500 demand, 1391, 1397–1398
absolute income hypothesis, 1502–1504 disposable income, 2181f
cognitive capabilities, 1460–1462 domestic production, 1384–1386
economic consequences, 1466–1468 earnings distribution, 1553
education, 1462–1465 employment, European countries, 1544, 1545f
empirical challenges, 1504–1505 equivalent income, 1429t
fetal origins hypothesis, 1465–1466, 1468 formation, 1546–1547
health capabilities, 1460–1462 labor supply, 1540, 1655–1656
hypothesis, 1500–1502 market income vs. disposable household income,
income inequality hypothesis, 1505–1511 634t
noncognitive capabilities, 1461–1462 panel surveys, 858
relative income hypothesis, 1502–1504, 1512 per capita income, 1427, 1428f
Health disparity, 1427 surveys and national accounts, 945–947
Health inequality, economic determination, total earnings vs. individual wages, 1553,
1476–1478 1554f
I-12 Index

Household behavior Human opportunity measure, 253

living standards, 985–1005 Human Poverty Index (HPI), 158–159
model, 1370, 1373, 1378–1386 Humphrey–Hawkins Full Employment and
nonunitary model, 994–996 Balanced Growth Act of 1978, lix–lx
unitary model, 991–992 Hypothesis testing
Household equivalence scales null of dominance, 435–436
family relations, 114 null of nondominance, 436
identification of scales, 115–116
income evaluation question, 118–119 I
individual indifference scales, 117–118 Identification, collective model, 1391–1400
modified OECD scale, 114–115 Cobb–Douglas example, 1396–1400
resource-based approach, 116 comparisons between families, 1400–1401
satisfaction approach, 118–119 under exclusion, 1399–1400
sharing rule-approach, 117–118 general case, 1396, 1398–1399
subjective approach, 118–119, 120 global restrictions, 1395
traditional approach, 117 Hicks’s aggregation theorem, 1392–1393
Van Praag approach, 119 household demand, 1397–1398
Household final consumption expenditure (HFCE), local identification, 1393–1394
939, 946 market equilibrium, 1402
Household income, 825–826, 825f, 947, 1544–1547 private goods and sharing rule, 1393–1395
distribution, 619–620, 1547–1561 public goods, 1395–1396
and earnings, 1670–1713, 1670t result, 1391–1393
Gini coefficient, 621 IF. See Influence function (IF)
health and, 1470–1471 IGE. See Intergenerational elasticity (IGE)
impact of ill-health on, 1474–1475 Immediate post-war theories
inequality, decompositions, 1553–1560 East Asia, 1851
LIS countries using equivalized, 629f export pessimism, 1850
tax treatment, 1667 global economy, 1852
Household, Income and Labour Dynamics in globalization and inequality, 1849
Australia (HILDA) survey, 858 import substitution strategies, 1850–1851
Household production labor scarcity, 1850
inequality between households, 1081–1084 land reforms, 1852
markets, 1079–1081 multisector planning models, 1850–1851
nonmarket work, 1071–1079 open economy, 1849–1850
Housework outward-oriented policies, 1851–1852
leisure and well-being, 1088–1093 pure closed economy, 1849
methodological issues, 1097–1100 trade and investment, 1850
sociological approach, 1095–1096 Immobility ratio (IR), 840
wages, 1085–1088 Imputed rent, 598–599
HRS. See Health and Retirement Study (HRS) Income-based poverty research, 2068–2069
Human capital endowments, 913 Income decomposition, 676–679
Human capital investments, 1247–1250 Income effects
interact with skill-biased technical change, on child health, 1492–1497, 1494t
1271–1272 high-income countries, evidence from,
vs. learning by doing, 1250–1251 1492–1496
Human capital theory, 25–26 low-and middle-income countries, evidence
Human Development Index (HDI), 153, 700–701 from, 1496–1497
Human opportunity index, 252–253 on medical care, 1491
 Index I-13

Income elasticity, 1491 evidence, 492–502

Income equivalent approach, xxviii factor prices, 508–509
Income equivalent variations, 132 France, 478–479
Income flux, 866, 883–884 industrialization, 510–511
Income group boundaries, 823–825 interpolation techniques, 488–489
Income growth life prospects, 509–510
Britain, 831–832, 832f measurement, 474, 502–510
equiproportionate, 837 reference total for income, 485–488
individual, 812–813, 834–835 reference total for population, 483–485
median real, 865, 865f tax avoidance, 489–491
proportional, 843–844 tax evasion, 489–491
rates, differential, 817–818 tax statistics, 480–483, 481t, 484t
Income immobility, 875–877 top income, 474, 479–491, 486t, 492–495, 493f,
Income inequality, xxv–xxxi, 2120–2122 494f, 496–498, 497f
between-and within-group, 341–342 wage dispersion, 507–508
components, 1625f Income measurement, 987–988
cross-country studies (see Cross-country studies) Income mobility
decompositions, 1429t intergenerational mobility, 889–922
economics literature, 1731–1732 intragenerational mobility, 855–888
factors to, 1432 measurement, 822–855
grand inequality regression equation, multiple dimensions, 811–814
1735–1739 single bivariate joint distribution, 808–809
to health, 1423 socially desirable, 814–818
high-income countries, 1501f social welfare, 818–821
global, xxxviii–xxxix variance components models, 809–810
individual-level evidence, 1508t Income polarization, 303–304, 332–333
international databases on, xxxiii continuous, 314–317
life expectancy and, 1501f discrete, 310–313, 317–318
measures and variability, 1750–1755 Income poverty rates
relative poverty and, 618–619, 618f EU countries, 2077–2078, 2078t
research questions, 1732–1734 OECD countries, 2073, 2074t, 2075t
Income inequality attitudes Income risk, 814
altruism, 1197 Income states, 511
charitable giving, 1198 Income tax
comparative reference group, 1149–1150 vs. administrative statistics, 2207–2210
distribution of income, 1187–1190 on labor supply, 1794
experimental economics, 1160–1170, 1180–1185 microsimulation estimation, 2185
normative reference group, 1149–1150 negative, 2077, 2127
outcome variables, 1185–1187 redistributive effects, 1792
redistribution, 1190–1196 returns and capitalize, 1319–1320
relative deprivation and satisfaction, 1150 revenues in the US, 2156
subjective well-being, 1152–1160 Income thresholds, 2065–2066
transfer elasticity, 1199 Income units, 599–601
volunteering opportunities, 1198 Incomplete data
well-being, 1171–1180 censored and truncated data, 441–443
Income inequality, long-run trends in, 477–511 trimmed data, 443–447
capital gains, 498–502, 501f Independence axioms, 164–167
capital incomes, 498–502, 499f Indirect taxes, 598–599, 2192–2196
I-14 Index

Individual annual earnings distribution vs. family international migration, 1869–1872

annual earnings distribution, 1555 labor market, 747
Individual earnings, 856–857 labor policies, 753
Individual incomes, 812–813, 834–835, 1544–1547 Latin America and Caribbean, 730–732
Individual labor earnings mobility, 873 Lorenz curves, 622–624
Inequality low frequency movements, 1265–1272
absolute, 739–740, 967–968 macroeconomic crises, 751
aggregate welfare, 740–743 macromodels of, 1236–1256
for all ages, 645, 649t market opportunities, 1897–1898
between-and within-country, 963–967 market reforms, 749–750
between-group, 1624–1634, 1625f, 1626f, 1630b, middle class bias, 1898–1901
1633f Middle East and North Africa, 733–734
Brazil, 732b monetary, xxi–xxv
and business cycle, 1256–1264 multidimensional, xxvii–xxviii
of capabilities, xxix multidimensional measurement
CGE models, 746 (see Multidimensional inequality
China, 729b measurement)
consumption, 705, 1846 Netherland, 1425–1427
convergence, 737–738 of opportunities, xxix–xxxi
cross-country regressions, 746 per capita consumption expenditures, 720–721,
data on (see Data on inequality) 721f
decile shares, 712, 712t, 713, 714t, 725, 725f polarization and, 351–353
decompositions, 745 political economy of, 1288–1295
defined, xxvii–xxviii relative, 967–968
democracy, 1895–1897, 1904–1905, 1928–1935 skill-biased technical change, 1269–1272
determinants of, 546–567 South Africa, 737b
developing countries, 706–711 South Asia, 734–735
developments, 548–549, 717–720 spatial, xxiv, 1865–1869
different facets of, xxi–xxxi sub-Saharan Africa, 735–737
distribution of national Ginis, 721–722, 722f tax records, 743–745
East Asia and Pacific, 727–729 technology and education, 749
Eastern Europe and Central Asia, 729–730 top incomes, 715–717
Europe vs. United States, 1325–1326 trends, structural changes, and shocks, 548–552
evolution of, 1551 United States from 1913, xixf
ex post, 1241 using life satisfaction, xxviii–xxix
financial accelerator and, 1264 within-group, 1634–1643, 1635t, 1638t, 1642t
and financial markets, 1272–1288 Inequality-adjusted Human Development Index
fiscal and social policy, 750 (IHDI), 194
Gallup World Poll, 713–715 Inequality adverse reward principle, 285–286
gender (see Gender inequality) Inequality aversion, 1161, 1166
globalization, 748–749 Inequality dynamics, 1256–1272
growth and development, 747–748 Inequality-extended Human Development Index,
growth-incidence curve, 723–725, 724f xxvii–xxviii
high-and middle-income countries in 2000s, Inequality indices, 361–362, 362t, 1296–1297
622–633 Inequality measurement, 619–620, 1562–1565
income (see Income inequality) coefficient estimates and variances for, 457t
India, 735b distributional statistics, 620–622
Indonesia, 729b GE class, 376–377, 400–403
 Index I-15

Gini coefficient, 404–406 Intergenerational mobility, 888

high-and middle-income countries in late 2000s, class mobility, 921
622–633 cross-national comparative evidence, 908–914
income distribution, since 1970, 633–645 cross-national differences, 889
LIS country statistics and rankings, 628–629, 629f, data and issues, empirical implementation,
630t 891–899
mean deviation, 403–404 evidence on sibling correlations, 914–920
testing equality, 417–420 Great Gatsby curve, 889, 890f
United Kingdom, 1992 and 1999, 456–458 income persistence, 922
Inequality of opportunity measurement intergenerational elasticity, 890
age and sex, 277 linear bivariate regression line, 889
choice of an index, 288–289 occupation, 921
DU vs. FG approach, 286–288 socioeconomic advantage, 920–921
lack of relevant information, 274–276 socioeconomic status, 921
methodological issues, 272–277 United States, 899–907
poor data set case, 282–284 International financial institutions (IFIs), 2015
rich data set case, 278–282 International Labor Organization (ILO) database,
types vs. tranches approach, 284–286 1747
Inequality of opportunity ratio (IOR), 250 International Microsimulation Association (IMA),
Influence function (IF), 397–398 2146
Inheritance, determinant of income distribution, International migration, 1869–1872
36–37 International prices, 950
Inheritance flow Interpolation techniques, 488–489
Europe, 1339, 1339f Intersection approach, 83
vs. mortality rate, 1336, 1336f Intragenerational mobility
national income ratio, 1334–1337 data and issues, empirical implementation,
vs. saving flow, 1333–1334 856–863
Inheritance stock-aggregate wealth ratio, evidence, 881–887
1337–1339 United States, 863–875
Inherited wealth Intrahousehold allocation determinants,
basic notions and definitions, 1327–1328 1386–1390
Britain, 1339–1340 Intrahousehold inequality
France, 1334–1339 and children, 1410–1412
Germany, 1340 between individuals, 1370–1373
inheritance flows vs. saving flows, 1333–1334 measurement, 114
Kotlikoff-Summers-Modigliani controversy, over time and sharing rule, 1409–1410
1328–1330 Inverted U hypothesis, 2011
limitations of KSM definitions, 1330–1331 Investment possibilities, financial markets and,
PPVR definition, 1331–1332 1272–1274
Sweden, 1341 Involuntary unemployment, 1448–1449
United States, 1342 IOR. See Inequality of opportunity ratio (IOR)
Institutional theories of income distribution, 34–36
Instrumental variables (IV) method, 899–900 J
Integrated squared error (ISE), 380–381 Justification bias, 1453
Inter-American Development Bank, 1746
Intergenerational decile transition matrices, 906, K
907t Kaitz index, 1562–1563
Intergenerational elasticity (IGE), 890, 912 Karl Marx’s positive economic theory, 14–16
I-16 Index

Kernel density estimation, 827–828 data sources and descriptive statistics, 1665–1669,
adaptive kernel estimator, 378–379, 381, 382f 1668t, 1669t
bandwidth selection, 380–381 defining and analyzing, 1596–1601
GDP, 369f empirical assessment, 1623–1655
from histogram to kernel estimator, 377–379 gross earnings inequality, 1644t, 1652t, 1654t
multivariate and conditional density, 382–383 longitudinal/pseudo-longitudinal approach,
Kolmogorov–Smirnov test, 375–376 1648–1653, 1649t, 1650f, 1652t, 1655f
Kotlikoff-Summers-Modigliani (KSM) recent theories based on, 1612–1622
controversy, 1328–1331 role, 1593–1596
Kuznets curve, 478, 551–552 wage dispersion and, 1670–1713
Kuznets series to household surveys, 471–473 wage inequality and, 1623–1655
within-group inequality and, 1634–1643, 1635t,
L 1638t, 1642t
Labor Labor policies, 753
households, 1540–1542, 1541f Labor supply, 1610
inputs, demand and supply, 1606–1612 changes, 2166–2167
relations quality, 1603 elasticity, 1042
share’s reduction, 1265–1266 models, 1405–1406, 2145
Labor-capital decomposition, 554 Lander-Year Gini coefficient, 1178
Labor force Latin America and Caribbean
participation, 1008–1009, 1009f inequality, 730–732
supply, 1041–1044 poverty, 775–776
Labor Force Survey (LFS), 2177–2178 Latin American economies, 1874
Labor market, 2112–2116 Laws of distribution, 14
average gender pay gap, 1007, 1007f Legal origin theory, 1601–1603
earnings inequality, 1608 Legitimate inequality, 1192
employment, 1010–1011 Lewis–Kuznets model, 1854
experience, earnings and, 390, 391f Lewis turning point, 1857
female participation, 1045–1046 Liberalization, 1287
gender segregation, 1013–1025 Life course model, 1468
imperfect competition in, 1606 Life-cycle income analysis model (LIAM), 2198
labor force participation, 1008–1009, 1009f Life expectancy, 1452
model, 1252 and income inequality, 1501f
outcomes, health effects on, 1444t, 1445t Life in Transition Survey (LiTS), 1158
part-time work, 1011–1012 Life satisfaction, 87–89, 90, 91, 1151, 1159, 1177
policies theory, 1620 Lifetime redistribution, 2196–2198
regulations, 1603 Linear model approach, 392
status, 2174–2176 LIS. See Luxembourg Income Study (LIS)
unemployment, 1012–1013 Living Standards Measurement Study (LSMS), 2008
United States, 1008 LMIs. See Labor market institutions (LMIs)
wage structure, 1009–1010 Local social welfare offices, 2187
women educational level, 1008 Log annual family income, 871, 872f
women’s participation, 1040–1050 Lognormal distribution, 373, 373f
Labor market institutions (LMIs), 1536–1537, 1538, Log-normal income distributions, 1187–1188,
1547–1561, 1601–1606 1187f
between-group inequality and, 1624–1634, Longer-term income, 813, 869–870, 869f
1625f, 1626f, 1630b, 1633f Longitudinal data tracking household income,
cross-sectional approach, 1643–1648 2068–2069
 Index I-17

Long run Marshall, Alfred, 18–20

defined, 471 Material deprivations, 148–149, 161–163, 162f,
earnings, 917, 918t 162t, 2122, 2125t
equilibrium, wages, 9 Maternal and parental leaves, 1046–1047
growth and financial development, 1282–1283 Maximum likelihood estimators (MLEs), 440–441
trends in wealth distribution, 474–475 Maximum likelihood method, 371
Lorenz curves, 362–363, 363f, xxiiif, xxii–xxiii MDGs. See Millennium Development Goals
of equivalized DHI, 622, 623f (MDGs)
feature, 1233 Mean integrated absolute errors (MIAE)
inequality, 622–624 measurement, 392–393, 394t
net worth, 450–451, 451f Mean integrated squared error (MISE), 380–381
Lower-income economies, 1474 Mean logarithmic deviation (MLD), 250, 400–401
Low-variability economy, 1285, 1285t, 1286 Mean log deviation, 1585
Low-wage employment, 1564–1565, 1565f Means-tested transfer payments, 2028–2029
Luck egalitarianism, 218 Measurement error, 366–367
Luxembourg Income Study (LIS), 328, 472, 594, Median real income growth, 865, 865f
702–703, 710, 946, 1188–1189, 1741, 2005, Median voter theorem, 1893
2065–2066 Medical care, income effects, 1491
Luxembourg Wealth Study, 1117 Meltzer-Richard model, 1887–1888
Metaphors, 218
M METR. See Marginal effective tax rate (METR)
Maasoumi–Zandvakili–Shorrocks indices, 878 MIAE measurement. See Mean integrated absolute
Macro-and micro-based regression methodology, errors (MIAE) measurement
1738 Microeconometric analysis, 2113–2114
Macroeconomics Microfinance schemes, 2040–2041
crises, 751 Microsimulation
effects, 2172–2174 academic communities, 2200–2201
panel approach, 1737 behavioral, 2143–2144, 2201
policy, 2145–2146 challenges and limitations, 2182–2192
statistics, 2182–2186 collaborative approach, 2204–2205
volatility, 1858–1859 data and methodological developments,
Macromodels of inequality, 1236–1256 2202–2203
Malthus’s theory, 8, 9 dynamic model, 2143–2144
Mahatma Gandhi National Rural Employment economic literature, 2144–2146
Guarantee Act in 2005, lix–lx EUROMOD, 2147–2148
Marginal effective tax rate (METR), 1041, extended income, 2192–2196
2153–2154, 2165 household incomes, 2149
Marginalist revolution, 16–18, 28 income distribution, 2142, 2150–2157
Marginal tax rates, 555–556, 556f, 557, 657, 661f, indirect taxes, 2192–2196
663 lifetime redistribution, 2196–2198
Market public policy, 2142–2143
equilibrium, 1402 redistribution, 2150–2157
income, 646t, 912 social and economic policies, 2142–2143
opportunities, 1897–1898 static model, 2143–2144
reforms, 749–750 statistical reliability indicators, 2149
value national wealth, 1309 subnational and supranational modeling,
Marketization hypothesis, 1080–1081 2198–2200
Marriage market, 1470 tax-benefit model, 2143
I-18 Index

Middle class size measurement, 318–322 immobility ratio, 840

Middle East and North Africa income flux, 853
inequality, 733–734 income-generation process, 851–852
poverty, 776 income rigidity, 845
Millennium Development Goals (MDGs), 698, income volatility, 853
968–969, 2009–2010, liv intertemporal consistency, 838
Mill, John Stuart, 41–43 King index, 843
Mincer earnings equations, 391t log-income change, 854–855
Minimum income protection indicators (MIPI), 2090 log-linear regression line, 840
Minimum wage legislation, 2033 longer-term inequality values, 848
Minimum wage theory, 1615–1618, 1665 low-income persistence, 841
Minority poverty, 2002 normalizations, 836–837
MISE. See Mean integrated squared error (MISE) Pearson correlation, 838
MLD. See Mean logarithmic deviation (MLD) per-capita relative movement index, 854
MLEs. See Maximum likelihood estimators (MLEs) permanent variance, 852
MMWI. See Money Metric Welfare Index personal characteristics, 850–851
(MMWI) positional mobility, 838–839
Mobility dominance poverty spell distribution, 841–842
correlation-reducing transformation, 834 proportional income growth, 843–844
cumulative bivariate distribution, 833 quantile regressions, 839
discount factor, 835–836 regression analysis, 839–840
individual income growth, 834–835 relative inequality index, 849
inequality aversion, 834 Shorrocks indices, 846–847
intergenerational income data, 834 single-parameter generalized Gini scheme, 845
social weights, 834–835 social calculus, 843
social welfare, 833 Spearman rank correlation, 838–839
steady-state income distribution, 835 survival probabilities, 841
transition matrices, 835–836 T-averaged incomes, 845–846
univariate income distributions, 836 Theil generalized entropy index, 852
Mobility-impeding disability, 1437–1438 transitory poverty, 849
Mobility indices United States, 863–864, 864t
absolute income movement, 853–854 window-averaging method, 851–852
average jump index, 841 within-generation mobility, 846
canonical random effects model, 850 Mobility matrix, 822–823
chronic poverty, 849 Mobility measurement
correlation-decreasing transformations, 844–845 description, 822–833
counterfactual income distributions, 837–838 dominance, 833–836
decomposability properties, 837 indices, 836–855
directional income growth, 843–844 Modified Director’s Law, 1900–1901
directionality, 837 Modified OECD scale, 114–115
earnings volatility, 852 Monetary inequality, xxi–xxv
equiproportionate income growth, 837 Money Metric Welfare Index (MMWI),
fixed-window calculation, 846 1381–1382, 1400
generalized entropy indices, 847–848 Mortality multipliers, 518
generic properties, 836 Motherhood wage gap. See Family pay gap
Gini coefficient, 838 Mother labor supply, 1047–1048
Gini mobility index, 842 Multidimensional inequality measurement,
idiosyncratic unpredictable income change, 850 xxvii–xxviii
 Index I-19

agnosticism on preferences, 112–113 Neoclassical economics, marginalist approach,

binary variables, 198–200 16–28
dominance and, 105–113 Alfred Marshall, 18–20
extended income approach, 121–122 general equilibrium theory, 22–23
Paretian egalitarian impossibility, 110–112 human capital theory, 25–26
partial orderings and sequential dominance imperfect competition, 23–25
criteria, 192–193 Knut Wicksell, 20–21
Pigou–Dalton transfer principle, 108–110, marginalist revolution, 16–18
190–192 risk taking, 27–28
two-stage approaches, 194–198 Neoclassical economists, efficiency and justice,
two-step aggregation procedure, 106–108 43–49
welfarism, 189 J. B. Clark, 47–48
Multidimensional Pigou–Dalton transfer principle, Marshall, 45–46
108–110 Pareto, 48–49
Multidimensional polarization, 305–306, 348–351 Walras, 43–45
Multidimensional poverty, 82, 606–607 Neoclassical model, 1237–1238
Multidimensional Poverty Index (MPI), 183 Net-of-depreciation income, 1309
Multidimensional poverty measurement Net-of-tax rate of return, 1343–1344
association-rearrangement principle, 185–187 Net worth (net wealth), 513–514
attribute-specific poverty thresholds, 184–185 entrepreneurial, 1264
axiomatic simultaneous aggregation approach, U.S. economy, 1234t
184 New economic geography, 1867
cardinal variables, 183–184 New home economics, 1071–1073
composite index approach, 156–157, 158–160 Nonagricultural share
continuous nonincreasing convex function, 185 GDP, 1936, 1939t
dichotomous variables, 185–187 population, 1936, 1937t
distribution of deprivations, 157–158, 157t Noncash income, 126
factor decomposability, 185 Noncash social spending
focus axiom, 185 household surveys, 2110
material deprivation, 156 insurance premium, 2110–2111
normative rearrangement principles, 158 intergenerational accounting, 2111–2112
partial orderings, 187–189 market price, 2110
subgroup decomposability, 185 relative income poverty threshold, 2111
union and intersection criteria, 157–158 social expenditure, 2108
Multiple-earner households, 1546, 1553 Noncooperative bargaining model, 1387–1388
Multiplicative random shocks models, 1355–1356 Nondemocracy, 1888
Multivariate statistical techniques, 154–155 Nonfinancial assets, 513–514
Nonmarginalist approaches
N institutional theories, 34–36
Nash bargaining, 1387–1388 macroeconomic approach, 33–34
Nash equilibrium, 1281 Pareto distribution, 28–32
National Longitudinal Survey of Youth (NLSY), property ownership and inheritance, 36–37
891 statistical approach, 32–34
National policy, 1873–1876 Nonmarket dimensions, 130–133
National poverty reduction target, 2070 Nonmarket work/household production
National vs. foreign wealth, 1318–1319, 1318f conceptual revolutions, 1071–1074
National wealth-national income ratio, 1310 measurement and valuation issues, 1074–1079
Natural reward principle, 262–263, 285–286 Nonmonetary indicators, 2069–2070
I-20 Index

Nonparametric density estimation, 392–393, self-employment, 1051–1052

904–905 S80/S20 and P90/P10 measures, 637–640, 638f,
Nonparametric method, 368 639f
Non-state-contingent assets, 1241 Overlapping generations models, 1238–1241, 1272
Non-take-up model, 2186–2190 Own-wage elasticities, 2171, 2171f
Nontransferable attributes, 145
Nonwage costs, 1441–1442 P
Normative economics Palma Index, 621, 628
Adam Smith, 38–40 Panel Study of Income Dynamics (PSID), 858,
John Stuart Mill, 41–43 1244, 1245, 1285, 1443–1447, 1455
Malthus and Ricardo on poor laws, 40–41 Paradox of redistribution, 2083
North American Free Trade Agreement (NAFTA), Parametric density estimation, 370, 371–377
1868 Parametric modeling, 368, 447–448
Nowcasting, income distribution, 2176–2178 Parametric utility function, 266–267
Null hypothesis, dominance/nondominance, Parental income, 894
432–435 Parental investments, 902–904
Parental leave, 1640–1641, 1667
O Parent–child conditional income expectation, 913
OBRE. See Optimal Bias-Robust Estimators Pareto coefficient, 488–489
(OBRE) Pareto distribution, 371–372, 1856
Occupation Pareto efficiency, 1374
health and, 1468–1470 Pareto’s law, 28–29, 30, 32
specific shocks, 1255 Participation tax rates (PTR), 2165
Occupational gender segregation, 1016, 1018–1019, Part-time work, 1011–1012, 1029–1031
1026–1027 Paternity leave, 1049–1050
OECD. See Organization for Economic Pathways model, 1467
Cooperation and Development (OECD) Pauperism, 1976
Oil-rich economies, 733 Pay-as-you-go social security pension wealth, 1309
Old-age pension schemes, 1063 Pearson chi-square test, 375–376
Opportunity-cost method, 1077–1078 Penn World Table (PWT), 128, 129
Optimal Bias-Robust Estimators (OBRE), 440–441 Pension gap, 1061, 1062f
Option luck, 246–247 Pensions
Ordered probit model, 389 defined benefits, 2102–2103
Ordinary least square (OLS) regression, 1736–1737 dimensions of governance, 2102
Organization for Economic Cooperation and family matters, 1066–1068
Development (OECD) financial sustainability issues, 2106
income distribution database, 1742–1743 gendered effects, 1062–1066
pensions reform, 1063–1064 Gini coefficient, 2107–2108
scale, modified, 114–115 male breadwinner model, 1059–1060
Organization for Economic Cooperation and noncontributory, 1060
Development’s (OECD) countries old-age and survivor benefits, 2107–2108
anchored poverty, 617f old-age poverty, 2102–2103
disposable household income Gini, 642f policies, 1488–1489
Gini coefficients, 634t, 643–645, 644f poverty risk, 2104–2105, 2105f
pretax and transfer income distribution, 640–645, redistributive effects, 2108
641f reform, OECD, 1063–1064
redistribution, 640–645 schemes, old-age, 1063
relative poverty, 612–613, 612f social safety net transfers, 2105–2106
 Index I-21

social security, 2105 Post-tax income, 1891

sparse and noncomparable statistics, 1060–1062 Posttax posttransfer
survivor’s, 1068 Gini index for, 646t
wages, 2103–2104 household income, 883–884
wealth, 515 income concept, 881–882
Per capita income, household, 1427, 1428f real family income measure, 866–867
Permanent incomes, 866, 891 POUM. See Prospect of upward mobility (POUM)
Personal income distribution, 23 PovCal database, 1746
Personal-preference principle, 84, 84f, 95, 104 Poverty
Personal wealth, 513–514 antipoverty policy, 2064–2065
Pigou–Dalton transfer principle, 96, 105, 108–110, changes in measurement, 764–765, 766t
146, 190–192, 304–305, 1148, xxviii child, 2094–2095
Polarization, 302, 306 conceptualizing and measuring, 2065–2071
bipolarization, 304–305, 318–337 convergence, 778–779
and conflict, 354–355 decomposition of changes, 768–769
defined, 302, 306 distribution functions, 762f, 763
empirical, 353 East Asia and Pacific, 772–774
importance of, 309 Eastern Europe and Central Asia, 774–775
income, 303–304, 310–318 economic crisis, 2064
and inequality, 351–353 focus axiom, 185–187
motivation, 306–309 GDP, 760–762, 762t, 769
multidimensional, 305–306, 348–351 global, 968–973
notation, 309–310 growth, 779–786
social, 305, 307, 337–341 growth-inequality-poverty triangle, 772, 773t
socioeconomic, 305, 341–342 headcount ratios, 181–183, 182f, 755, 756f,
Policy change effects, 2158–2182 763–764, 764f, 765f, 770, 771t
Policy income inequality and economic crisis,
to date, impact, liv–lvii 2120–2122
objectives, liv intergenerational transmission, 2116–2120
prospects for future, lvii–lviii in-work, 2096–2102
swaps, 2164–2165 Latin America and Caribbean, 775–776
thinking outside the box, lixf, lviii–lxi level of and trends in, 611–616
Political economy maps, 2041–2042, 2199–2200
forces, 1294 mean consumption, 757, 758f
of inequality, 1288–1295 measurement, 1994
Political insider mechanism, 1601–1603 Middle East and North Africa, 776
Political power theory, 1601–1603 Millennium Development Goal, 753–754
Politicoeconomic complementarity, 1601–1603 Moran scatterplot, 758–760, 761f
Politico-economy theory, 1291 multidimensional measurement
Poor-area development programs, 2041–2043 (see Multidimensional poverty
Population health-income inequality, 1506t, 1507t measurement)
Positional change mobility, 811 National Accounts data, 767
Positional income mobility, 867, 867f noncash social spending, 2108–2112
Positive economics PPP conversion rates, 754
factor prices, 6–16 rediscovery, America, 2001–2004
functional distribution, 6–16 regressions, 757–758, 759t
Post-policy income, 1898 relative, 787–789, 2004–2007
Post-Rawls-Dworkin inequality, 219 South Asia, 777
I-22 Index

Poverty (Continued) financial underdevelopment, 2012

squared poverty gap, 757 geographic disparities, 2016
subjective, 2004–2007 globalization, 2013
sub-Saharan Africa, 757, 777–778 income fare, 2015–2016
total population poverty vs. child poverty, industrial policies, 2018
613–614, 613f international financial institutions, 2015
trends, 614, 614f, 2072–2073 inverted U hypothesis, 2011
welfare state (see Welfare state) macroeconomic stability, 2018
World Bank, 755 neoclassical growth theory, 2013
Poverty gap, 2067–2068 nontrade protection policy, 2017–2018
Poverty measurement, 407–412, 604f, 606–607, post-independence policies, 2013–2014
755–757, 756t poverty reduction, 2014
FGT, 408–409 price indices, 2012
origins and development, 604–606 relative poverty measures, 2010
sen poverty index, 409–410 trade policies, 2017
SST, 410–412 wages, 2010–2011
Poverty threshold, 153–154 Progressive tax reduction, 662, 663
Poverty traps, 1273–1274 Promotion, 1022–1025
PPP. See Purchasing power parity (PPP) Proportional income tax, 1043
Pragmatic convenience motivate approaches, Prospect of upward mobility (POUM), 818, 1155,
126–127 1194
Prediction, income distribution, 2174–2178 PSID. See Panel Study of Income Dynamics (PSID)
Preference-based approach, 80–81 PTR. See Participation tax rates (PTR)
Preference welfarism, 88, 90 Public commodities, 1379–1382
Preferred tax rate, 1291, 1292–1293, 1293f Public goods
Pregovernment income, 856 contributions and punishment, 1164–1166
Preston curve, 1500 identification, 1395–1396
Pretax Publicly financed workhouses, 1976
distributions, 630–633, 632f, 640–645 Publicly provided services
income components, 874–875 and benefits, 120–126
Price majorization, 190 extended income approach, 121–122
Private commodities, 1379–1382 respect for preferences, 122–124
Private-goods and sharing rule, 1378–1379, Public Policy, 1040–1050
1393–1396 Purchasing power parity (PPP), 126–130, 699,
Private vs. government wealth, 1317–1318, 1318f 948–952
Private wealth-national income ratio, 1310, 1315, Pure exchange mobility, 823
1316f, 1317, 1317f PWT. See Penn World Table (PWT)
Probability density function, 369–370, 372f
Productivity shocks, 1259–1260, 1259f Q
Profits QUAIDS demand system, 1414
classical theory, 10 Quasi-relative poverty, 609
ownership structure determination, 10 Quintile transition matrices, 879
PROGRESA program, 2037–2038
Progressive market economy R
antitrade policies, 2016–2017 Rank-dependent utility theory, 171, 198
distributional dynamics, 2011 Ranking criteria implementation, 426–436
distribution-neutral growth, 2012–2013 asymptotic distributions, 426–430
external trade, 2016 hypothesis testing, 435–436
 Index I-23

intuitive approach to dominance, 430–432 Retirement income system, 1063–1064, 2102,

null hypothesis, 432–435 2103f
Rawls’s Principles of Justice, 1998–2001 Revealed preferences approach, 99
Real asset, 513–514 Revenu de Solidarité Active (RSA) scheme, 2087
Redistribution Revenue-neutral reforms, 2191–2192
constraints, 1895–1897 Reverse causality, 1485, 1505
equalizing effects, democracy, 1890–1892 Review of Economic Dynamics (RED) (2010),
Gini index for, 646t 1556–1557, 1580
for OECD countries, 640–645 Reweighting approach, 2174–2175
policy, 37, 44, 56 Ricardo’s theory, 11
social protection (see Social protection and Rich world’s poverty rediscovery, 2007–2010
redistribution) Risk aversion, 1026–1027, 1292–1294, 1293f
taxes, 1294, 1902–1904 Risk neutrality, 1291–1292
tax-transfer policies, 1733–1734 RLC. See Relative Lorenz curve (RLC)
Redistributive Preferences Index (RPI), 1195–1196 Roemer’s approach, 246, 260
Redistributive taxation, 254
Reference-group income, 1154 S
Reference period, 599–601 SAH. See Self-assessed health (SAH)
Reform Act 1832, 1893–1894 Same-preference principle, 92, 98
Reform policy, 2179 SBTC. See Skill-biased technological change
Regression methodology, 1736–1739 (SBTC)
Relative bipolarization indices, 335–336 Scandinavian welfare approach, 148–149
Relative deprivation, 1156, 1504, 2006 SCF. See Survey of Consumer Finances (SCF)
Relative implicit tax rate, 666–667, 667f Secondary school enrollment, 1936, 1941t
Relative income hypothesis, 1160–1161, Second-order dominance, 424–425
1502–1504, 1508t, 1512 Second poverty enlightenment
Relative income poverty thresholds, 2071 credit market, 1998
Relative Lorenz curve (RLC), 424, 425 marginal social welfare, 1995–1996
Relative position hypothesis, 1504 market failure, 1997
Relative poverty, 607–608, 787–789, 788t nonutilitarian formulations, 1996
vs. anchored poverty, 616–619 Pareto principle, 1997
and income inequality, 618–619, 618f poverty rediscovery, America, 2001–2004
measurement, 608–610 promotional antipoverty policies, 1998
in OECD nations, 612–613, 612f public attention, 1994–1995
rates for total population, 611f Rawls’s Principles of Justice, 1998–2001
trends in, 616t relative and subjective poverty, 2004–2007
Relative prices and sectoral effects, 1859 rich world’s poverty rediscovery, 2007–2010
Relative wage, 562f social ferment, 1995
Reliability assessment, microsimulation, 2190–2192 utilitarian schema, 1995–1996
Remittances, 1869–1872 Self-assessed health (SAH), 1425–1427, 1432–1433,
Rent, 11 1457, 1472–1473
Replacement cost method, 1077 decompositions of inequality, 1433–1435
Residual luck, 247–248 earnings in, 1430f
Resource fetishism, 69 employment rates by, 1431f
Resource sharing, 599–601 interval regressions, 1434t
Responsibility cut issue, 260, 270f Self-employment
Responsibility-sensitive fair income distribution, economic crisis, 1051
1190 fuzzy scope, 1052–1053
I-24 Index

Self-employment (Continued) Social conflict, 307–308, 354–355

gender gap, 1053 Social exclusion, 148–149, 2065
income, 1233 Social expenditure, 1667
OECD countries, 1051–1052 Social inclusion indicators, 2068–2069
self-confidence, 1051 Social insurance, 2034
women, 1053–1059 Social investment, 2123–2126
Semiparametric methods, 447–452 Socialism, 1990–1991
choice of β, 449 Socially desirable income mobility
inequality and dominance, 449–452 alternative income concept, 817
model estimation, 448–449 bivariate joint distribution, 818
parametric model, 448 constant income flow rate, 817
Sen, Amartya differential income growth rates, 817–818
capability approach, 75–85, 246 dynastic inequality, 816
choice of dimensions, 81 equality of opportunity, 814–815
poverty index, 409–410 fluctuating incomes, 817
welfarism, 72–73 generation mobility, 814
Sen–Shorrocks–Thon (SST) poverty index, income gains, 817
410–412 income risk, 817
Sequential dominance criteria, 145, 192–193 inequality of longer-term incomes, 815–816
SES. See Socioeconomic status (SES) inequality of opportunity, 815
Shapley-value method, 252 longer-term inequality reduction, 816–817
Sharing rule prospect of upward mobility, 818
approach, 117–118 Social models, 1601–1603
global restrictions, 1395 Social polarization, 305, 307
local identification, 1393–1394 concepts and motivation, 337–338
private-goods and, 1378–1379, 1393–1395 index, 339, 339f
Short-term mobility, 874, 882 measurement, 338–341
Sibling correlations, 914–920 Social policy, 750
Sibling fixed effects, 1464–1465 Social protection and redistribution
Silverman’s rule-of-thumb bandwidth selection, at-risk-of-poverty rate, 2084
380, 394 cash public social expenditure, 2081, 2082f
Simple two-period model, 1288–1294 cash transfers, 2088–2094
Single-breadwinner households, 1546 child poverty and child cash transfers, 2094–2095
Single-earner households, 1546–1547 concentration index, 2085–2086, 2086f
Single health variable (SAH), 1436 earned income tax credit, 2088
Skill-biased technological change (SBTC), 749, family formation incentives, 2087
1594–1595, 1607–1608, 1609–1610, GDP, 2080–2081
1613–1614 Gini coefficients, 2086
Skill-bias technical change (SBTC) hypothesis, xlvf, income security and cost compensation, 2084
xli–xlii, xliii, xlv–xlvi, xlix insurance principle, 2085
wage dispersion, xlix means-tested benefits, 2083–2084
Skilled-to-unskilled labor ratio, 1853 median voter theorem, 2084
Skill wage premium, 1270 minimum income system, 2087
Smith, Adam, 38–40 minimum wage protection, 2081–2083
Smith’s theory paradox of redistribution, 2083
wage differentials, 10 pensions, 2085, 2102–2108
wage structure, 12, 13 pre-transfer income, 2084
Social-choice theory, 218, 219 public expenditures, 2083
 Index I-25

RSA scheme, 2087 Standardized World Inequality Indicators Database

social policy tools, 2081 (SWIID), 1748–1749, 1915–1916, xxxiii,
social spending, 2081 xxxvii–xxxviii
social transfer policies, 2083 Standards of living
sociodemographic characteristics, 2085–2086 nonmarket dimensions, 130–133
tax/transfer systems, 2086 PPP indexes, 126–130
universalism, 2087 Stated preferences approach, 99–100
working poor and in-work poverty, 2096–2102 State-level income inequality, 1509–1510
working tax credit, 2087–2088 Stationary theory, 1241–1246
Social protection policies, 1975–1977 Statistical Office of the European Union
Social research, 1991–1994 (EUROSTAT), 1740–1741
Social Security benefit income, 870 Statistics on Income and Living Conditions (SILC)
Social Security Disability Insurance (SSDI) data, 600–601, 1571
eligibility, 1450–1451 Status-quo policy, 232–233
Social security system, 1067 Steady-state capital share, 1349–1351
Social security wealth, 515 Steady-state equilibria, 1243
Social unrest, 1935 Steady-state factor prices, 1239
Social wage, 1565–1566 Steady-state wealth distribution, 1274–1275,
Social welfare, 189 1275t
Atkinson–Bourguignon utility-of-income Stepwise institutional change theory, 1621–1622
function, 821 Stochastic dominance, 425–426
income risk, 820–821 Stochastic mortality, 1240
individual-level mobilities, 821 Stolper–Samuelson theorem, 1847
Lorenz curves, 818–819 Strike activity, 1665
loss aversion, 821 Structural mobility, 811
positional mobility, 819 Subjective well-being approach
stochastic dominance checks, 820 decision utility, 90
utility function, 819–820 experienced utility, 90
utility-of-income functions, 819 freedom, 92–93
Social welfare functions (SWFs), 818–819 happiness, 85–93
Socioeconomic Database for Latin America and the hedonic welfarism, 87–89
Caribbean (SEDLAC), 702–703 life satisfaction, 87–89, 90, 91
Socioeconomic polarization, 305 preference welfarism, 88, 90
between-and within-group income inequality, respect for preferences, 92
341–342 responsibility, 92–93
identification/alienation hybrids, 342–348 Subnational and supranational modeling,
index, 342, 348 2198–2200
Socioeconomic status (SES), 1463, 1469, 1502–1503 Sub-Saharan Africa
Sociómetro-BID, 1746 inequality, 735–737
South Asia poverty, 777–778
inequality, 734–735 Subsistence wages, 8
poverty, 777 Super-star theories, 475–476
Spatial inequality, xxiv, 1865–1869 Supply-side theory, 663
Spearman-rank correlation coefficient, 708 Survey of Consumer Finances (SCF), 1233,
Spousal retirement benefit, 1067 1235–1236, 1242, 1341–1342
Squared poverty gap (SPG), 757 Survey of Labour and Income Dynamics (SLID),
SSDI eligibility. See Social Security Disability 858
Insurance (SSDI) eligibility Survivor’s pension, 1068
I-26 Index

Sweden Three-goods H–O model, 1855

capital incomes, 498–499 Time series regression methodology, 1737
CEO and worker incomes, 560, 561f Top incomes, 645–652, 715–717, 948
gross income class, 484t capital gains, 498–502, 501f
income volatility, 896 capital incomes, 498–502, 499f
intergenerational earnings mobility, 908, 908t caveats and limitations to data, 653–654
share trends in, 658f data and methodology, 652–667
tax reform, 882 definition, 655–660
tax unit concept, 483–485 earners in top decile, 496–498, 496f
top income and wealth fractiles in, 554f interpolation techniques, 488–489
wages dispersion, 508 labor and capital compositions, 678f
wealth inequality, 531–534, 532f methods and data, 479–491, 486t
wealth tax data, 518 Pareto distribution, 488–489
SWIID. See Standardized World Income reference total for income, 485–488
Inequality Database (SWIID) reference total for population, 483–485
tax avoidance, 489–491
T tax evasion, 489–491
Tax, 554–557, 1041–1044, 2031–2032 tax statistics, 480–483, 481t, 484t
administration records, 870 top shares in late 2000s, 668–669, 669f
allowances, 2094–2095 top tax rates on, 565–566
behavioral responses to, 490–491 Top income shares, 474, 492–495, 493f, 494f, 497f,
benefit policies, 886 500–502, 652–653, xxiii–xxiv
benefit principle, 56–58 analysis, 651
cumulative effects of, 475–476, 568–569 capital gains for, 658–660
effect of democracy, 1918–1927 cumulative changes, 674
instruments, 2094–2095 determinants, 562–566, 564t
laws, 514 dynamics of, 652
legislation changes, 655–656, 657 estimation, 656
noncompliance model, 2186–2190 vs. Gini coefficients, 679–680, 682f
records, 743–745 gross and disposable, 666–667
reform, 657 growth in countries, 669–676, 671f
and transfer policies, 1849 household survey data, 680–683
Tax avoidance, 489–491, 518–519, 660–665 inequality measurement, 503–506
Tax-benefit microsimulation model (TAXBEN), pre-and post-tax, 666–667, 668f
2144–2145 as proxies, 683–687
Tax-channeled in-work benefits, 2100–2101 public economics and, 652
Tax evasion, 489–491, 518–519, 660–665 reduce tax progressivity, 663
Tax Reform Act (TRA) of 1986, 500–502, 663 tax-based and survey-based estimation, 502–503
Tax revenue, 1924–1927, 1925t, 1926t WTID, 668, 670, 674–676
residual of, 1920, 1921f Top-incomes theory, 1614
TAXSIM model, 2151–2152 Top tax rates, 565–566, 1614
Tax units Top wages, 557–562
concept, 483–485 Total gross income, 480–482, 499f
definitions, 665–666 Trade openness, 1865–1869
United Kingdom, 665 Trade theory, 508–509, 548
Tax wedge, 1640, 1641, 1667 Tranche-compensation principle, 284, 287–288
Theil generalized entropy index, 852 Transfer income distributions, 630–633, 632f,
Theil inequality index, 880 640–645
 Index I-27

Transfer tax, 480–482 intergenerational mobility, 899–907

Transformative Monitoring for Enhanced Equity intragenerational mobility, 863–875
(TransMonEE) database, 1746–1747 labor market, 1008
Transitional dynamics, steady states and, xliii–xlvi labor share in business sector, 1256–1257, 1257f
Transitory earnings shocks, 886–887 men’s earnings, 861–862
Transitory poverty, 849 National Longitudinal Survey of Youth, 891
True earnings, 861 net worth in economy, 1234t
Tsui multidimensional inequality measure, 197–198 Panel Study of Income Dynamics, 858
Two-dimensional poverty measures, 187–188 poverty rate, 2072
Type-compensation principle, 284–285, 287–288 relative poverty measurement, 608–610
Types vs. tranches approach, 284–286 relative wage, 562f
rigidity profiles, 846, 847f
U share trends in, 658f
Ultimatum game, 1163–1164 Social Security Administration, 900
Uncertainty effect, 1452 wealth distribution, 1245–1246
Unemployment, 1012–1013 wealth-income ratio, 1313, 1313f
Unemployment benefit theory, 1619, 1666 wealth inequality, 537–540, 538f
UNICEF, 1746–1747 vs. West Germany income mobility, 875–881
Uniform Pigou–Dalton majorization principle Units of analysis, 1736, 2152–2153
(UMPM), 194–195 University of Texas Inequality Project (UTIP),
Union density, 1597–1598, 1637–1640, 1748, xxxiii
1641–1643, 1646–1647, 1653, 1665 Unpaid work, 984, 984f, 1093–1095
Union presence theory, 1618–1619 U.N. System of National Accounts (SNA), 1308
United Kingdom UNU-WIDER database, 1744–1745
child benefit, 2205–2207 Utilitarianism, 49–54, 234, 1987–1988
disposable income, 914, 915t critique, 50–51
earnings inequality, 1580 sum of utilities, maximizing, 49–50
employment rates, 1545–1546, 1546f Utilitarian policy, 234
Family Resources Survey, 2183–2184 Utility
income distribution, 1973 and 1979, 386–387, and happiness, 72–73, 85–93
386f, 388–389, 389f mental attitude, 72–73
inequality measurement, 1992 and 1999, 454f, Utility of poverty
456–458 aggregate domestic savings, 2018
National Child Development Study, 897 borrowing constraints, 2021
tax units, 665 cheap labor supply, 1974–1975
wealth inequality, 535–537, 536f colonialism, 2021
United States conditional cash transfer, 2028
capital gains income, 658–660 consumption inequality measures, 2024–2025
CEO and worker incomes in, 560, 561f credit market failure, 2020
conditional density plots, 829, 830f cross-country regressions, 2025–2026
decile transition matrices, 823, 824t, 868 dominant economic theory, 1974
distribution of earnings in economy, 1233, 1234t England’s Poor Laws, 1977–1979
earnings inequality, 1573–1579, 1575f, 1576f, exogenous income gain, 2023–2024
1578f, 1579f, 1608 financial sector development, 2025
General Social Survey, 1172 Gini index, 2024
income data, 828–829, 828f growth-equity tradeoff, 2019–2020
inequality, xixf, 1853 health environment, 2022–2023
intergenerational income persistence, 902, 903f lending, 2023
I-28 Index

Utility of poverty (Continued) evolution of, 1573–1585

living standards, 2026 Germany, 1610–1611
long-run mean income, 2018 LMIs and, 1623–1655
negatively sloped labor supply curve, 1974 longitudinal/pseudo-longitudinal approach,
neoclassical growth model, 2022 1579f, 1648–1653, 1649t, 1650f, 1652t
neoclassical theory, 2019 measurement, 1561–1573
nonlinear wealth effects, 2027 within-group, 1634–1643, 1635t, 1638t, 1642t
savings and investment rates, 2022 Wage shares, 662
schooling, 1975 Wage variable, 1565–1568
social protection policies, 1975–1977 War on Poverty, 2066
socioeconomic gradient, 2020 Weak comonotonic additivity (WCA), 194–195
Solow model, 2019 Weak Pareto principle, 110, 111f
wealth distribution, 2021 Wealth, 513–517
aging, 1361–1363
V augmented, 515
Van Praag approach, 119 Britain, 1310–1312, 1322–1323
closed-form formulas, 1352–1354
W decile, 579t
Wage, 873–874 France, 1310–1312, 1320–1322, 1334–1339
bargaining, 25 health and, 1471–1473
centralization, 1665 holding unit, 513
conditional density function estimation, 370, 370f human capital, 1305–1306
determination, 9, 1606–1607 income ratios, 1308–1319
discrimination, 1037–1038 inheritance-income ratio, 1307
distribution, 1543–1544, 1610 inherited, 1326–1342
earnings, 552–557, 1659–1664, 1661t, 1662t, Kuznets curve hypothesis, 1305
1663t, 1664t life-cycle savings, 1306–1307
education and training implications, 12–13 life expectancy, 1360–1361
equation with endogenous debt, 1297 multiplicative random shocks models, 1355–1356
flexibility, 1612 national income, 1305
housework, 1085–1088 net, 513–514
income, 679 net-of-tax rate of return, 1307
long-run development, 560–561 pension, 515
long-run equilibrium, 9 percentile, 572t, 576t
lower, 1029 personal, 513–514
Malthus’s theory, 8, 9 saving motives, 1360–1361
structure, 11–13, 1009–1010 shocks, 554–557
subsistence, 8 shocks vs. steady states, 1342–1344
top, 557–562 social security, 515
Wage dispersion, 507–508, 546–547, 1537–1538, steady-state capital share, 1349–1351
1543–1544, 1546–1547, 1560–1561 steady-state wealth-income ratio, 1344–1349
and institutions, 1686t Sweden, 1324
and LMIs, 1670–1713 U-shaped pattern, 1306
polarization and offshorability approaches, 1680t wage earnings and, 552–557
Wage inequality, 1266–1269, 1856, xliii–xliv Wealth and gender
between-group, 1624–1634, 1625f, 1626f, 1630b, composition effects, 1111–1113
1633f gender gap measurement, 1114–1115
debate (1980–2000), 1593–1596 households, 1107–1108, 1115–1117
 Index I-29

inequality, 1105 stationary theories of, 1241–1246

marital dimension, 1106 Wealth inequality, long-run trends in, 474–475,
strategies and limitations, 1109–1111 511–546
Wealth concentration, 1319–1326 Australia, 520, 521f
Britain, 1322–1323 composition of wealth, 543–544
concepts, data sources, and methods, 1319–1320 consumer durables, 516
France, 1320–1322 data and measurement, 512–519
inequality reversal, 1325–1326 Denmark, 520–521, 522, 522f
steady-state level, 1351–1360 Finland, 522–524, 524f
Sweden, 1324 foreign wealth holdings, 516–517
Wealth distribution, 1287–1288 France, 524–526, 525f
analysis of, 512 long-run evolution, western countries, 540–543,
borrowing limits, 1274–1279, 1275t, 1276f 541t
concentration and skewness, 1235t measurement, 517–518
data, 512 Netherlands, 526–527, 527f
of economy, 1245 Norway, 528–531, 530f
facts on, 1233–1236 shares-within-shares estimation, 542–543, 543f
of income, 1304 Sweden, 531–534, 532f
long-run trends in, 474–475 Switzerland, 534–535, 534f
measures of, 518–519 tax avoidance, 518–519
steady-state, 1274–1275, 1275t tax evasion, 518–519
United States, 1245–1246 top wealth shares, 517, 518
Wealth dynamics United Kingdom, 535–537, 536f
borrowing constraint, 1972 United States, 537–540, 538f
children’s learning, 1971–1972 wealth concept, 513–517
human capital, 1971 wealth holding unit, 513
moral weaknesses, 1973–1974 Wealth-in-the-utility-function model, 1346–1347
nonhuman capital, 1971 Weber–Fechner law, 49
physiology, 1971–1972 Weibull distributions, 374–375
poor people, 1971 Welfare
poverty trap, 1972–1973, 1972f reforms, 2034
protection policies, 1973 regimes, 1735
public responsibility, 1973–1974 Welfare indices, 394–425, 438–440
social and political stability, 1973 asymptotic inference, 396–400
Wealth effects background results, 398–399
adult health, 1478–1489 basic cases, 394–396
on health behavior, 1479t, 1483t, 1489–1491 parametric approaches, 421–423
Wealth-income ratios QAD, 399–400, 445
Britain and France, 1310–1312 Welfare state
country balance sheets, 1308 econometric modeling, 2080
Old Europe vs. New World, 1312–1315 economic crisis, 2120–2126
rich countries, 1316–1319 employment rate, 2080
steady-state, 1344–1349 income poverty rates, EU countries, 2077–2078,
wealth vs. capital, 1309–1310 2078t
Wealth inequality negative income tax experiments, 2077
irrelevance of income and, 1237–1238 poverty reduction, 2075–2077
in neoclassical model, 1237–1238 social democratic and corporatist regimes,
overlapping generations models and, 1238–1241 2078–2079
I-30 Index

Welfare state (Continued) Anglo-Saxon-style negative income taxes,

social democratic/Nordic countries, 2078–2079 2099–2100
social transfers, 2077–2078 Anglo-Saxon-style tax credits, 2100
spending levels, 2078–2079 at-risk-of-financial-poverty status, 2098
wage protection, 2079–2080 Earned Income Credit, 2099
Welfarism, 189 household earnings distribution, 2101–2102
Amartya Sen, 72–73 household equivalized disposable income,
hedonic, 87–89 2096–2097
preference, 88, 90 in-work benefit schemes, 2102
Well-being low-paid insecure employment, 2096
dimensions, 148–150 low-work-intensity population, 2098
domains, 143 median poverty threshold, 2097
measurement, 75–105 postindustrial labour markets, 2096
West Germany self-employment income, 2096–2097
conditional density plots, 829, 830f single-parent households, 2100–2101
family incomes, 827–828, 827f sole-breadwinner households, 2098–2099
income data, 828–829, 828f supply and demand elasticity, 2101
nonparametric transition probability plots, tax-channeled in-work benefits, 2100–2101
829–830, 831f tax credits, 2099
rigidity profiles, 846, 847f wage inequality, 2101–2102
vs. United States income mobility, 875–881 Working tax credit (WTC), 2087–2088
Wicksell, Knut, 20–21 World Bank, 1745–1746
WIDER project, 2181–2182 World Bank’s PovcalNet, 702
WIID. See World Income Inequality Database World Development Indicators (WDI), 713, 1746
(WIID) World Income Distribution (WYD), 702–703,
Willingness-to-pay for the services, 124–126 1745–1746
Withholding taxes, 2185 World Income Inequality Database (WIID), 472,
Within-country income distributions, 1734, 1810t 703, 1744–1745, 1915–1916, xxxiii
Within-generation income mobility analysis, 833 World social welfare function, 967
Within-group inequality, 1634–1643, 1635t, 1638t, World Top Incomes Database (WTID), 651, 668,
1642t 670, 674–676, 1748, 1915
Within-industry wage differentials, 1853–1854 World Values Survey (WVS), 1176
Work–family conciliation policies, 1036–1037
Workfare, 2032–2034 Z
Work incentives, 2153–2155 Zero egalitarian equivalence (ZEE) approach, 244,
Working-age households, with employees, 1546, 245, 246
1548f Zero mobility reference point, 813
Working poor and in-work poverty Zeuthen’s theory, 25