The distributional implications of asymmetric income dynamics

Angelopoulos, K. , Lazarakis, S. and Malley, J. (2020) The distributional implications of asymmetric income dynamics. European Economic Review, 128, 103502. (doi: 10.1016/j.euroecorev.2020.103502)

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Income dynamics differ between groups of households defined by whether the head has university education or not and have changed asymmetrically in Great Britain since 2008. Using a heterogenous agent incomplete markets model, we examine the quantitative implications of these differences for wealth inequality and for the distribution of conditional welfare losses. Within-group wealth inequality is higher for the non-university group and has increased since 2008 for both groups, while between-group inequality has also increased. Welfare losses are significantly higher for the non-university educated since 2008, and are driven by both a greater fall in mean income and a larger rise in income risk. Non-university educated households, which had initial wealth below the median and net labour income in the lower quintiles, suffered bigger losses.Social insurance policies beyond those currently in place can mitigate such welfare losses via tax and benefit redistributive mechanisms. For the broad majority of households, social insurance is valued more when it insures against the big adverse income shocks.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Malley, Professor Jim and Lazarakis, Mr Spyridon and Angelopoulos, Dr Konstantinos
Authors: Angelopoulos, K., Lazarakis, S., and Malley, J.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:European Economic Review
ISSN (Online):1873-572X
Published Online:24 June 2020
Copyright Holders:Copyright © 2020 The Authors
First Published:First published in European Economic Review 128: 103502
Publisher Policy:Reproduced under a Creative Commons License

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Project CodeAward NoProject NamePrincipal InvestigatorFunder's NameFunder RefLead Dept
190423ESRC Doctoral Training Centre 2011...Mary Beth KneafseyEconomic and Social Research Council (ESRC)ES/J500136/1Research and Innovation Services