GINI DP 75: Income Inequality and the Family

This paper seeks to test empirically whether claims by Wilkinson and Pickett (2010) (W&P) on the pervasive negative effects of income inequality on social conditions in rich countries are borne out in the case of the family. It first examines correlations between 13 family indicators and income inequality across developed countries. It finds that while two indicators measuring early family formation confirm the association with income inequality proposed by W&P, most indicators do not show a robust link, while some have a negative correlation, in possible contradiction of the W&P thesis. The paper then explores a structural precondition which W&P identify as necessary for the income inequality effect to operate, namely, the presence of negative social gradients in outcome variables. It finds that a negative social gradient is present for the family variables already shown to be linked to income inequality, but the small number of variables that are responsive to inequality in this way highlights the limited scope of the W&P thesis. The paper finally looks beyond W&P’s point-in-time approach and finds that the growing literature on trends in income inequality and family outcomes over time further challenges the thrust of the W&P argument. The overall conclusion reached is that while the W&P thesis has certain validity in the family domain, income inequality on its own does not seem to have a consistent relationship with family behaviour and does not appear to be a major contributor to differences between countries or change over time in family patterns.