INEQUALITY AND PANEL INCOME CHANGES: CONDITIONS FOR POSSIBILITIES AND IMPOSSIBILITIES

Income changes in an economy are usually assessed through the changes over time in cross‐sectional variables such as economy‐wide inequality. An alternative is to use panel data to gauge income changes among identified income recipients. In this article, we analyze these two approaches taken togethe...

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Bibliographic Details
Published inInternational economic review (Philadelphia) Vol. 64; no. 1; pp. 295 - 324
Main Authors Duval‐Hernández, Robert, Fields, Gary S., Jakubson, George H.
Format Journal Article
LanguageEnglish
Published Philadelphia Blackwell Publishing Ltd 01.02.2023
Subjects
Changes
Economic theory
Income inequality
Intuition
Panel data
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Summary:Income changes in an economy are usually assessed through the changes over time in cross‐sectional variables such as economy‐wide inequality. An alternative is to use panel data to gauge income changes among identified income recipients. In this article, we analyze these two approaches taken together, each measured in multiple ways. We establish that under specific conditions, it is impossible to have falling inequality together with divergent panel income changes. We also provide conditions explaining when rising inequality can arise together with convergent panel changes. We provide the intuition behind these results and show when such results fail to hold.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12603