Determinants of Household Earnings Inequality: The Role of Labour Market Trends and Changing Household Structure

Luxembourg Income Study (LIS) Working Paper Series No. 591 by Wen-Hao Chen, Michael Förster and Ana Llena-Nozal (Social Policy Division, OECD) published June 2013

Abstract

This article assesses various underlying driving factors for the evolution of household earnings inequality for 23 OECD countries from the mid-1980s to the mid-2000s.

There are a number of factors at play.

Some are related to labour market trends – increasing dispersion of individual wages and changes in men’s and women’s employment rates. Others relate to shifts in household structures and family formation – more single-headed households and increased earnings correlation among partners in couples. The contribution of each of these factors is estimated using a semi parametric decomposition technique.

The results reveal that marital sorting and household structure changes contributed, albeit moderately, to increasing household earnings inequality, while rising women’s employment exerted a sizable equalising effect.

However, changes in labour market factors, in particular increases in men’s earnings disparities, were identified as the main driver of household earnings inequality, contributing between one-third and one-half to the overall increase in most countries. Sensitivity analysis applying a reversed-order decomposition suggests that these results are robust.

JEL classification: D31, J12, J22, I30

Full text (PDF 41pp)

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Intergenerational links in female labor force participation

an article by Melinda Sandler Morrill and Thayer Morrill (North Carolina State University, Raleigh, USA) published in Labour Economics Volume 20 (January 2013)

Abstract

Fernandez, Fogli, and Olivetti (2004) introduce an innovative model of how the experiences of one generation of women affect the behaviour of the next generation of women via their sons/husbands. Empirically they find that a woman is more likely to work if her mother-in-law worked than if her own mother worked.

We confirm this intriguing result but demonstrate that there is also a link between the labour force participation choices of mothers and daughters.

Further, in an alternative theoretical model we show that the relationship between the labour force participation of mothers-in-law and daughters-in-law may be due instead to a woman’s own preferences formed before selecting a spouse.

Interestingly, the model demonstrates that the correlation in labour force status may be stronger for a mother-in-law/daughter-in-law pair than a mother/daughter pair, even if the preference formation channel is solely from mothers to daughters.

Highlights

► Women are more likely to participate in the labor force if their mother worked.
► Correlation between mother-in-law/daughter-in-law pairs is also strong.
► We present a model of the preference formation channels and assortative mating.
► Assortative mating and mother/daughter channel could induce mother-in-law result.

Full text (PDF 10pp)

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