Unpacking transatlantic income inequality

This paper uses newly harmonized survey and register data on incomes and labor market outcomes as the basis for consistent comparisons of inequalities across 17 North American and European countries over the period 1995–2021. We examine trends in disposable income inequality in the working-age population, defined as persons aged 25 to 60, as well as its component parts of market income inequality and redistribution through government tax and transfer systems. We adjust incomes to allow for changes in education, population aging, and household structure in each country. We test for convergence across countries in demographically-adjusted disposable income inequality, along with market income inequality and redistribution. There is strong evidence of convergence over time in disposable income inequality across the 17 countries, despite a divergence in the dispersion of market income inequality driven by very heterogeneous trends for hours of work and the number of workers in households across countries. Consistent with this we find a strong convergence across countries in the dispersion of our measure of redistribution. There are reductions over time in inequality-reducing redistribution in the Nordic countries and increases in some other European and North American countries, with the net effect being more similarity across countries, a lower average level of redistribution, and a higher average level of disposable income inequality. These trends are being driven by the bottom 95% of the income distribution. Our results are robust to a variety of alternative specifications including the measure of inequality, trimming of data outliers, and sample period.

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Publication Details

Journal
Proceedings of the National Academy of Sciences
Published
2026-11-03
DOI
https://doi.org/10.1073/pnas.2625474123
Primary Topic
Income, Poverty, and Inequality
Type
article
Field-Weighted Citation Impact
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article

Unpacking transatlantic income inequality

Marja Riihelä, André Decoster, Svetoslav Danchev, Pedro Portugal et al.
Proceedings of the National Academy of Sciences
Income, Poverty, and Inequality
article

Unpacking transatlantic income inequality

Marja Riihelä, André Decoster, Svetoslav Danchev, Pedro Portugal, Marten O. Palme, Antoine Bozio, Jim Been, James W. Banks, Johan Sæverud, Heike Vethaak, Søren Leth‐Petersen, Laura Hospido, Kjell G. Salvanes, Arizo Karimi, Egbert Jongen, Andreas Peichl, Antonis Mavropoulos, Cristina Barceló, Bram De Rock Z, Ann-Christin Rathje, Martin Halla, Grigoris Pavlou, Craig Riddell, Tuuli Paukkeri, Tullio Jappelli, Maxime Tô, Jonathan Cribb, Patrick Bennett, Maximilian Blömer, Immacolata Marino, James P. Ziliak, Andrea Michaela Weber, Pedro S. Raposo, Annalisa Scognamiglio, Bradley L. Hardy, Brindusa Anghel, Terhi Ravaska, Tom Wernham, Niki Kalavrezou, Nikos Vettas, Barra Roantree, Koen Caminada, Jonas Vanderkelen, Malka Guillot, Daniele Checchi A, Richard W. Blundell, Elena Herold, Max Lay, Elizabeth Krause, Charlotte Lucke, Bart Capéau, Kelly Foley, Lukas Puschnig, Anne Steuernagel, David Green, Olympia Bover, Giorgos Gatopoulos, Carlos Oliveira
article en

Abstract

This paper uses newly harmonized survey and register data on incomes and labor market outcomes as the basis for consistent comparisons of inequalities across 17 North American and European countries over the period 1995–2021. We examine trends in disposable income inequality in the working-age population, defined as persons aged 25 to 60, as well as its component parts of market income inequality and redistribution through government tax and transfer systems. We adjust incomes to allow for changes in education, population aging, and household structure in each country. We test for convergence across countries in demographically-adjusted disposable income inequality, along with market income inequality and redistribution. There is strong evidence of convergence over time in disposable income inequality across the 17 countries, despite a divergence in the dispersion of market income inequality driven by very heterogeneous trends for hours of work and the number of workers in households across countries. Consistent with this we find a strong convergence across countries in the dispersion of our measure of redistribution. There are reductions over time in inequality-reducing redistribution in the Nordic countries and increases in some other European and North American countries, with the net effect being more similarity across countries, a lower average level of redistribution, and a higher average level of disposable income inequality. These trends are being driven by the bottom 95% of the income distribution. Our results are robust to a variety of alternative specifications including the measure of inequality, trimming of data outliers, and sample period.

Proceedings of the National Academy of SciencesVol. 123(45)
Vienna University of Economics and Business (AT), Leiden University (NL), Uppsala University (SE), University of Copenhagen (DK), Austrian Institute of Economic Research (AT), Université Libre de Bruxelles (BE), Ifo Institute for Economic Research (DE), Institute for Fiscal Studies (GB), University of British Columbia (CA), University of Kentucky (US), University of Liverpool (GB), University of Liège (BE), Stockholm University (SE), Tampere University (FI), Friedrich-Alexander-Universität Erlangen-Nürnberg (DE), Georgetown University (US), Bank of Spain (ES), University of Milan (IT), Central European University (AT), Trinity College (CA), Trinity College Dublin (IE), Universidade Católica Portuguesa (PT), Hague Institute for Global Justice (NL), University of Manchester (GB), University of Saskatchewan (CA), Centro de Estudios Monetarios y Financieros (ES), European Centre for Social Welfare Policy and Research (AT), Centre for Studies in Economics and Finance (IT), University of Tampere (FI), NOVA School of Business and Economics (PT), University College London (GB), Banco de Portugal (PT), Paris School of Economics (FR), Athens University of Economics and Business (GR), Ludwig-Maximilians-Universität München (DE), École des hautes études en sciences sociales (FR), Norwegian School of Economics (NO), KU Leuven (BE)
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Income, Poverty, and Inequality
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