Increased Income Inequality in OECD Countries and the Redistributive Impact of the Government Budget

Anthony B. Atkinson

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Published in print March 2004 | ISBN: 9780199271412
Published online August 2004 | e-ISBN: 9780191601255 | DOI:

Series: WIDER Studies in Development Economics

 Increased Income Inequality in OECD Countries and the Redistributive Impact of the Government Budget

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The recent rise in inequality in the distribution of disposable income in many, although not all, countries has led to a search for explanations, particularly since for much of the postwar period falling income inequality has been the norm. In the OECD countries, on which this chapter concentrates, the cause has been identified as rising wage dispersion, coupled with persistent unemployment in Europe. However, a number of factors need to be brought into any explanation of the extent and timing of changes in income distribution, including movements in factor shares, changes in real interest rates, and the impact of the government budget. This chapter focusses on the last of these. It has five sections: Introduction; Redistributive Impact of the Government Budget in selected OECD countries—a review of the statistical evidence from five OECD countries where a time series of studies covering the 1980s and the 1990s is available (UK, Canada, West Germany, Finland, Sweden; The Government Budget in Principle and Policy Reaction to Demographic Shifts—a simple framework within which the distributional implications of different government policy responses to changes in economic conditions and the different elements influencing the choice of response are explored; Policy Changes in Redistributive Taxes and Transfers: Case Studies of Unemployment Benefit and Personal Taxation—in the five European countries already studied, and in the US; and Summary of Conclusions.

Keywords: Canada; demography; economic conditions; Europe; Finland; government budget; government policy; income distribution; income inequality; inequality; OECD; Organization for Economic Cooperation and Development; Personal Taxation; Policy Changes; redistribution; Redistributive Taxes; Sweden; Taxes; Taxes and Transfers; unemployment; Unemployment Benefit; UK; US; wage dispersion; West Germany

Chapter.  11843 words.  Illustrated.

Subjects: Economic Development and Growth

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