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Modeling the Joint Distribution of Income and Wealth

In: Measurement of Poverty, Deprivation, and Economic Mobility

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  • Markus Jäntti
  • Eva M. Sierminska
  • Philippe Van Kerm

Abstract

This paper considers a parametric model for the joint distribution of income and wealth. The model is used to analyze income and wealth inequality in five OECD countries using comparable household-level survey data. We focus on the dependence parameter between the two variables and study whether accounting for wealth and income jointly reveals a different pattern of social inequality than the traditional “income only” approach. We find that cross-country variations in the dependence parameter effectively account only for a small fraction of cross-country differences in a bivariate measure of inequality. The index appears primarily driven by differences in inequality in the wealth distribution.

Suggested Citation

  • Markus Jäntti & Eva M. Sierminska & Philippe Van Kerm, 2015. "Modeling the Joint Distribution of Income and Wealth," Research on Economic Inequality, in: Measurement of Poverty, Deprivation, and Economic Mobility, volume 23, pages 301-327, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:reinzz:s1049-258520150000023010
    DOI: 10.1108/S1049-258520150000023010
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    References listed on IDEAS

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    1. Maria Ana Lugo, 2005. "Comparing Multidimensional Indices of Inequality: methods and application," Working Papers 14, ECINEQ, Society for the Study of Economic Inequality.
    2. Stéphane Bonhomme & Jean-Marc Robin, 2009. "Assessing the Equalizing Force of Mobility Using Short Panels: France, 1990-2000," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(1), pages 63-92.
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    8. P. Jenkins, Stephen & Jäntti, Markus, 2005. "Methods for summarizing and comparing wealth distributions," ISER Working Paper Series 2005-05, Institute for Social and Economic Research.
    9. Eva Sierminska & Andrea Brandolini & Timothy Smeeding, 2006. "The Luxembourg Wealth Study – A cross-country comparable database for household wealth research," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(3), pages 375-383, December.
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    1. Rolf Aaberge & Marco Francesconi & Jørgen Modalsli & Ola L. Vestad, 2024. "How Business Income Measures Affect Income Inequality and the Tax Burden," CESifo Working Paper Series 11496, CESifo.
    2. Rolf Aaberge & Anthony B. Atkinson & Sebastian Königs, 2018. "From classes to copulas: wages, capital, and top incomes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(2), pages 295-320, June.
    3. David Gallusser & Matthias Krapf, 2022. "Joint Income-Wealth Inequality: Evidence from Lucerne Tax Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(1), pages 251-295, August.
    4. Vladimir Hlasny & Lidia Ceriani & Paolo Verme, 2022. "Bottom Incomes and the Measurement of Poverty and Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(4), pages 970-1006, December.
    5. Miha Dominko & Miroslav Verbič, 2021. "The Effect of Income and Wealth on Subjective Well-Being in the Context of Different Welfare State Regimes," Journal of Happiness Studies, Springer, vol. 22(1), pages 181-206, January.
    6. Doss, Cheryl R. & Catanzarite, Zachary & Baah-Boateng, William & Swaminathan, Hema & Diana Deere, Carmen & Boakye-Yiadom, Louis & Suchitra, J.Y., 2018. "Do men and women estimate property values differently?," World Development, Elsevier, vol. 107(C), pages 75-86.
    7. Isabel Z. Martínez, 2021. "Evidence from Unique Swiss Tax Data on the Composition and Joint Distribution of Income and Wealth," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 105-142, National Bureau of Economic Research, Inc.
    8. Graciela Sanroman & Guillermo Santos, 2021. "The joint distribution of income and wealth in Uruguay," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 40(83), pages 609-642, August.
    9. Frank Cowell & Brian Nolan & Javier Olivera & Philippe Van Kerm, 2017. "Wealth, Top Incomes and Inequality," LWS Working papers 24, LIS Cross-National Data Center in Luxembourg.
    10. Lidia Ceriani & Vladimir Hlasny & Paolo Verme, 2021. "Bottom Incomes and the Measurement of Poverty: A Brief Assessment of the Literature," Working Papers 589, ECINEQ, Society for the Study of Economic Inequality.
    11. Vladimir Hlasny, 2021. "Parametric representation of the top of income distributions: Options, historical evidence, and model selection," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1217-1256, September.
    12. Kuypers, Sarah & Marx, Ive, 2017. "The Truly Vulnerable: Integrating Wealth into the Measurement of Poverty and Social Policy Effectiveness," IZA Discussion Papers 11069, Institute of Labor Economics (IZA).
    13. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    14. Antonella D’agostino & Giovanni De Luca & Dominique Guégan, 2023. "Estimating Lower Tail Dependence Between Pairs of Poverty Dimensions in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(2), pages 419-442, June.
    15. Mathä, Thomas Y. & Porpiglia, Alessandro & Sierminska, Eva, 2011. "The immigrant/native wealth gap in Germany, Italy and Luxembourg," Working Paper Series 1302, European Central Bank.
    16. Sarah Kuypers & Ive Marx, 2019. "The Truly Vulnerable: Integrating Wealth into the Measurement of Poverty and Social Policy Effectiveness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 131-147, February.
    17. José María Sarabia & Vanesa Jordá & Faustino Prieto & Montserrat Guillén, 2020. "Multivariate Classes of GB2 Distributions with Applications," Mathematics, MDPI, vol. 9(1), pages 1-21, December.
    18. David Gallusser & Matthias Krapf, 2019. "Joint Income-Wealth Inequality: An Application Using Administrative Tax Data," CESifo Working Paper Series 7876, CESifo.

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    More about this item

    Keywords

    Income; wealth; inequality; copula; multivariate Gini; C1; D31; J10;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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