Trends in Income Inequality, Intertemporal Variability, and Mobility Risk in Thirty Countries

Abstract

We apply a novel decomposition of panel data on individual incomes in 30 countries and find the US is exceptional in its increases of income risk over the last decades. Income risk is decomposed into long-run inequality, intertemporal variability around individual-specific growth rates (volatility), and variation in individual-specific growth rates (mobility risk) using a decomposable generalized entropy measure. We also measure the degree to which the government tax and transfer system lowers longrun inequality, intertemporal variation, and mobility risk, and again the US is exceptional, with the tax and transfer system lowering the risk of net income less in the US than in other developed countries we examine. We further find that growth rates are positively associated with long-run mean incomes in most countries, implying growth tends not to be pro-poor, and that volatility tends to be higher for those with higher long-run mean incomes, so that form of risk may be progressively distributed.