INEQUALITY AND PANEL INCOME CHANGES: CONDITIONS FOR POSSIBILITIES AND IMPOSSIBILITIES |
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Authors: | Robert Duval-Hernández Gary S. Fields George H. Jakubson |
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Affiliation: | 1. Open University of Cyprus, IZA, and CIDE, Cyprus;2. Cornell University, IZA, and WIDER, U.S.A.;3. Cornell University, U.S.A. |
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Abstract: | 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. |
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