Income Distribution And Redistribution: A Microdata Analysis For Seven Countries

This paper reports the detailed results of a comparison of the distribution and redistribution of income in seven countries using the Luxembourg Income Study (LIS) database. Use of LIS facilitates comparisons of inequality in respect to similarly‐defined variables, permits methodological alternatives to be used, and allows the countries to be compared on aspects of income ranking and policy equity in ways not otherwise possible. The results indicate a pattern of inequality in which Sweden is the most equal, followed by Norway, the U.K. and Canada, while among the less equal countries Israel is generally more equal than Germany‐or the USA., whose relative inequality depends on the measure chosen. Use of the LIS database also allows a more detailed explanation of these results, noting, for example, the role of cash benefits in increasing equality in Sweden and the U.K., and in aiding the bottom quintile in Germany; and the important part played by self‐employment income in contributing to the high top quintile shares in Germany and Israel, and in rendering the Norwegian distribution less equal than that of its Scandinavian neighbour. The wealth of the database, however, means that methodological issues need to be treated both more explicitly and more carefully than is possible with more restrictive data. To interpret the data also requires a considerable degree of knowledge about the institutional features of tax and social provisions in each country, so that an income microdatabase could usefully be completed by one focused on the details of such provisions.