Income Inequality in Rich Countries During the 1980s

Abstract

Several recent studies have documented the rising earnings and wage inequality and the widening inequality in the distribution of family income in the United States over the past 15 years. We examine the effect of government tax and transfer policies to offset some of these disequalizing changes, using a sample of six nations observed in two periods during the 1980s. We ask the following questions: in addition to changes in earned income inequality, how do other components of market income affect market pre-government income inequality? How does government tax and transfer policy affect the distribution? And finally, what were the trends in market driven inequality, government intervention, and disposable income inequality during the 1980s? The results of our exploration indicate that the U.S. redistribution system is decidedly weaker that that found in other nations.