Frans Folkvorddisentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality
Name: Frans Folkvord Supervision: Prof. Dr. Wout Ultee Masterthesis Social & Cultural Science Radboud University 15-06-2011 Disentangling The Gordian Knot of Income Inequality Pagina 1
Abstract
In this paper we tried to disentangle the Gordian Knot of income inequality. We tested economic, political, and sociological theories, to explain the increased income inequality in eleven Westerncountries. Results showed that political developments and differences between countries explain a large proportion of the variance of income inequality, measured as the Gini-coefficient, while economic and sociological characteristics like economic growth, unemployment, and female labour participation, explain only a minor part of the story. Furthermore, we tested a combination of household characteristics and macro characteristics to explain income at the household level. The results showed that education is an important explanation for household income, not only the education of the head and the spouse, but also assortative mating. We also found that being employed is strongly related with a higher income, but being self-employed does not lead to a higher income in every country. The macro characteristics explained the household income to some extent, but conducting future research with more waves would provide us with a clearer picture. In this attempt to disentangle the Gordian Knot of income inequality, we realized that further research is necessary to untie the knot. We found evidence which will hopefully stimulate future research in this topic, not only for reasons of justice, but also to prevent the negative consequences of increased income inequality.
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Contents
The Gordian Knot 1. Introduction 2. Rising Inequality 2.1 The Gini Index 2.2 Top Incomes 3. Theory and Hypotheses 3.1 Economic Explanations 3.1.1 Economic Growth 3.1.2 Unemployment 3.2 Political Explanations 3.2.1 Neo-liberalization 3.2.2 Social Expenditure 3.2.3 Taxation 3.3 Sociological Explanations 3.3.1 Merits 3.3.2 Changing Demographics 4. Data and Measurement 4.1 Dependent Variable 4.2 Independent Variable 4.2.1 Political Characteristics 4.2.2 Economic Characteristics 4.2.3 Sociological Characteristics 4.2.4 Luxembourg Income Study 4.2.4.1 Dependent Variable 4.2.4.2 Independent Variables 5. Results 6. Discussion 7. Conclusion 8. Bibliography page 4 page 4 page 9 page 9 page 12 page 14 page 15 page 15 page 16 page 18 page 18 page 21 page 22 page 23 page 23 page 26 page 28 page 29 page 29 page 29 page 32 page 32 page 33 page 33 page 34 page 36 page 60 page 64 page 66
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The Gordian Knot

In a Greek legend, the Gordian knot was the name given to an intricate knot used by Gordius to secure his oxcart. Gordius, who was a poor peasant, arrived with his wife in a public square of Phrygia in an oxcart. An oracle had informed the populace that their future king would come riding in a wagon. Seeing Gordius, the people made him king. In gratitude, Gordius dedicated his oxcart to Zeus, tying it up with a peculiar knot. An oracle foretold that he who untied the knot would rule all of Asia. Many people tried to undo the knot but all to no avail. In 333 B.C. Alexander the Great had invaded Asia Minor and arrived in the central mountains at the town of Gordium; he was 23. Undefeated, but without a decisive victory either, he was in need of an omen to prove to his troops and his enemies that the outcome of his mission - to conquer the known world - was possible. In Gordium, by the Temple of the Zeus Basilica, was the ox cart, which had been put there by the King of Phrygia over 100 years before. The staves of the cart were tied together in a complex knot with the ends tucked away inside. Having arrived at Gordium it was inconceivable that the young, impetuous King would not tackle the legendary "Gordian Knot". Alexander climbed the hill and approached the cart as a crowd of curious Macedonians and Phrygians gathered around. They watched intently as Alexander struggled with the knot and became frustrated. Alexander, stepping back, called out, "What does it matter how I loose it?" With that, he drew his sword, and in one powerful stroke severed the knot. That night there was a huge electrical storm, which the seers conveniently interpreted to mean the gods were pleased with the actions of this so-called Son of Zeus who had cut the Gordian knot. (www.alexander-the-great.co.uk/gordianknot.htm).
1. Introduction
The Greek mythology is often used nowadays, to express the deeper, underlying meaning of these legendary stories. The metaphor in this story about the Gordian Knot can be used with comparison to the problem that we face in this article, the puzzle of income inequality. This paper reviews the empirical evidence on the level and trend in household income inequality in a great variety of countries, and will look for causes that can explain the income position of households in different countries. The increase in economic disparities over the past 30 years has led to extensive research on the causes and consequences of income inequality. The distribution of wealth and income has been studied for quite some time, starting by Plato, and followed by many other philosophers, economist, sociologist, and political scientists. Gerhard Lenski (1966, p. 13) states that .. inequality among societies has been a basic fact of human life for more than five thousand years. Every known society, past or present, distributes its scarce and demanded goods and services unequally. The more rigidly stratified a society is, the less chance does that society have of discovering any new facts about the talents of its members. Where, for instance, access to education depends upon the wealth of ones parents, and where wealth is differentially distributed, large segments of the population are likely to be deprived of the chance even to discover what are their talents. The distribution of wealth is not only an issue of justice, but it also affects many different aspects of a society. Where many scholars and politicians see Adam Smith as the leading economist for the free-market principle and establishing ones own wealth, Smith also recommended that "No society can surely be flourishing and happy, of
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which the far greater part of the members are poor and miserable." (Smith, 2008, p. 78). Rising income inequality can be a good thing to the extent that it is crucial to reward work effort, talent and innovation key engines of economic growth and wealth creation (Davis & Moore, 1945). However, there are instances where income inequality reaches excessive levels, in that it represents a danger to social stability while also going against economic efficiency considerations (Wilkinson & Pickett, 2010). Higher income inequality is associated with higher crime rates and lower life expectancy. Higher inequality may also deepen macroeconomic instability in the sense that lowincome households may adjust more slowly to economic shocks. In addition, there are instances where richer groups may secure economically-inefficient advantages, such as distortive taxes or an allocation of public funds that goes against the economic interests of the country as a whole. More fundamentally, when income inequalities are perceived to reach excessive levels, social support for pro-growth policies may be strongly eroded. Already now, there are widespread perceptions in many countries that globalization does not work to the advantage of the majority of the population (World of Work Report 2008). According to the influential historian Tony Judt (2010), an unequal distribution of income and wealth has led to a great variety of problems in Western societies. Income inequality is strongly related to an increase in health- and social problems like number of murders, mentally ill, average life expectation (Judt, 2010a). Wilkinson and Pickett show us that income inequality is also linked to less social mobility, more criminality, lower life expectancy, more teenage mothers, obesity, level of trust, childrens educational performance, homicides, and imprisonment rates (Wilkinson & Pickett, 2010). In this study, we will examine how income inequality has evolved over the last three decades, and which underlying dynamics and mechanisms are causing these trends. Income inequality has been examined by researches from three different approaches, which led to a diverse spectrum of explanations that caused the rise in inequality (Atkinson, 2003; Rossides, 1997; Weeden, Kim, Carlo, & Grusky, 2007). We will start with describing these three perspectives. In the first place, economists put several causes forward, like differences in labor market (Gottschalk & Smeeding, 1999; Klein, 2002), employers and employees unionization within countries (Klein, 2007; Marx, 2008; Visser, 2010; Weeks, 2005) minimum wages and the increased wages of high incomes (Green, 2007). Secondly, political researchers focus on the redistribution of taxes, electoral systems within countries (Bergh & Nilsson, 2010; Iversen & Soskice, 2006), and the duration of democracy and socialist legislation of countries (Hewitt, 1977b). The third approach toward causes of inequality comes from the sociologists. Where economists have studied inequality for some time, Green (2007), as an economist, wonders where the sociological researchers have been. The causes and consequences of inequality have been neglected by sociologist for too long. To be fair, there were historical reasons for this neglect (Myles and Myers, 2007). Weeks (2005; p. 1) states that the current discourse on inequality within countries, and especially within the developed market economies of the Organization for Economic Cooperation and Development (OECD), must be placed in historical
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context. Therefore, we will start by describing the historical context that has influenced the income inequality. After World War II, many civilians realized that their life showed more insecurities than they could have imagined before the war (Cornia & Kiiski, 2001; Judt, 2010a). This collective consciousness arose after the World War II, when the cities had to be building up from scratch. This awareness led to a tendency to improve the welfare state to create more security and to build a social safety net for the elderly, the sick and the unemployed (Judt, 2010b; Mak, 2009; Swaan, 2004). This solidarity with the less privileged was a result from the War, that showed what insecurity could do to many people. The people realized what mass unemployment and poorness did to people, like the 1930s in Germany. Of course this was not the only cause for the rise of Hitler, but it was one of the most important causes (Judt1, 2010). The tax rates and the politics of redistribution developed in a manner that the highest income deciles paid more taxes and the lower income deciles received more social welfare after this post-war period. From the end of the Second World War to the end of the 1970s, the distribution of income in most affluent democracies, and in the United States in particular, remained relatively stable (Deininger & Squire, 1996; Kenworthy, 2007; Kenworthy & Pontusson, 2005a). Studying trends in income inequality was like watching the grass grow (Myles & Meyers, 2007; p 579). All this changed around the 1980s, when the secular trend of rising inequality in earnings and family income that began in the 1970s became apparent (DiPrete & Eirich, 2006; Van Dam, 2009; Van Rossem, 1984). Most research that focused on income inequality that started from the 1980s, was macro-level research, whereby most research was conducted in a narrative way (Wilterdink, 1985, 1995; Wilterdink & Van Heerikhuizen, 1985). Around the 1980s, there was a political trend visible in the Western countries, called neoliberalism, whereby the power of unions decreased and the influence of the economic elite increased (Klein, 2002, 2007; Reich, 2007; Soros, 2008). A clear example of this scenario can be seen in the political decisions of Margaret Thatcher and Ronald Reagan, respectively in the United Kingdom and the United States. Their policy gave less power to unions and more power to employers, lowered the tax collection and decreased the tax redistribution. Many institutions and companies that were state management were privatized, whereby the influence of the state was minimized, according to the theory of Milton Friedman (Achterhuis, 2010; Klein, 2007). These neoliberal policies were seen as extreme changes in most of the other developed countries, but many aspects of these policy changes were acquired by many Western countries as well (Van Dam, 2009). This revolution of political changes, is sometimes called the end of history, whereby it is assumed that there is no struggle between ideologies, the neoconservative simply over won the communistic ideology (Fukuyama, 2006). As a consequence of these political changes, inequality increased during the 1980s till now, whereby rich people became richer and poor people stayed poor. These trends teach us that it is quite remarkable that most sociologists stood on the sidelines,
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while many economists tried to account for this development. Part of the story has to do with the shift in focus among sociologist from the structure of inequality to the allocation of individuals to positions within that structure. Social inequality now is thus an unconsciously evolved device by which societies insure that the most important positions are conscientiously filled by the most qualified persons (Rousseau, 2003). Hence every society, no matter how simple or complex, must differentiate persons in terms of both prestige and esteem, and must therefore possess a certain amount of institutionalized inequality. This was what sociologist started to examine, which was already mentioned by Max Weber in the beginning of the 20th century (Weber, 2009). Put another way, in the 1970s and 1980s, there was a gradual but significant move from investigating how much inequality there is (and why) to examining determinants of attainment (H. Ganzeboom et al., 1987; H. Ganzeboom, Treiman, & Ultee, 1991). The sociologist, who did study the rising inequality, came up with three main developments that occurred at the macro level that led to increased inequality. These three developments are the increased computerization of the labor market, assortative mating and the increased women employment (Milanovic, 2000; Moene & Wallerstein, 2001; Myles, 2003; Myles & Meyers, 2007). Other causes that have been studied by sociological scholars are: technological changes (Berry, Bourguignon, & Morrison, 1983; Leigh, 2004; Toffler, 1990), globalization (Klein, 2007), deindustrialization, de-unionization (Klein, 2002, 2007), a decreasing significance of nation-state democracy (Lincoln, 2007; Reich, 2007), changing demographic (Esping-Andersen, 2007; Leigh, 2004), and welfare state retrenchment (Esping-Andersen, 1990, 2002). Changing demographics, like the increased womens educational attainment, increasing labour force participation of women, educational homogamy, and skill-biased technological change, are sociological explanations for the increased inequality. In this research, we want to focus on the integration of these indicators into a more exhaustive explanation that can explain the relation of sociological, economic, and political aspects with the rise in inequality around the 1980s in industrialized countries. We want to find a causal relation between macro and micro developments that can explain the increased income inequality in some countries and did not increase in other countries. Narrative explanations, like the increased interdependence theory of Wilterdink (Wilterdink, 1985, 1995; Wilterdink & Van Heerikhuizen, 1985) will not suffice, because we want to find causal relations, while we are controlling for other indicators. The descriptive method that is chosen by many scholars is not the method we will use. We will choose for quantitative analyses of the data to examine the causal relations. The countries that we choose are; the United States, the United Kingdom, Australia, Sweden, Norway, Finland, Denmark, Germany, the Netherlands, Canada and France. These countries that we have selected are chosen according recent literature that described the income trends from the 1960s till the middle of the 2006. According to this literature, we can divide these countries into three groups (Cornia & Kiiski, 2001; Weeks, 2005). The first group shows a de-equalizing effect after the Second World War, till the 1970s. After
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this period, we see a strong increase in the inequality in these countries, till the middle of the 21st century (Leigh, 2004). These countries are Australia, the United States of America, and the United Kingdom, also called the Anglo-Saxon countries (Weeks, 2005). New Zealand is normally included in these Anglo-Saxon countries, forming the Anglo-Saxon-Four, but the Luxembourg Income Study (LIS) has no data for New Zealand. Therefore we decided to leave New Zealand out of analyses. The second group are the Scandinavian countries, with Denmark, Finland, Norway and Sweden as their members. These countries show an enormous equalizing effect of their income inequality, starting after the Second World War, except for Denmark, which shows a relatively minor decline. The third group are Other Western Countries, which show a minor equalizing of the income inequality after the Second World War till the 1980s, followed by a period of minor increase of the income inequality from the 1980s till 2006. For these countries, we will examine three different questions. First of all, we will try to find an answer on the question how the income inequality trends have developed over time in these eleven different countries. We will do this by looking in the first place at the decreased inequality between 1945 till 1980, secondly at the increased inequality after this period (1980-2010). Next, we will try to find an answer which country characteristics explain the Gini coefficients in these countries in the different country-year combinations between 1960-2004/2007. In the third place, we will try to explain how these developments occurred, which dynamics are playing on the background and how these dynamics resulted in the developments that we have found in the first research question. This way, we can integrate the possible explanations from sociological, political, and economic point of view in one thesis, whereby we can look at the different effects of the different variables in the countries that we will examine.
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2. Rising Inequality 2.1 The Gini-index

Our first research question concerns the increased income inequality in industrialized countries. In previous research, it is generally found that income inequality rose in the last three decades for OECDcountries (Bradley, Huber, Moller, Nielsen, & Stephens, 2003; Lemieux, 2006; Nordstrom & RIdderstrale, 2003; Solimano, 2001). The rich become richer, and the poor become poorer (Iversen & Soskice, 2004). We will examine the development of the Gini coefficient for 11 countries that we have chosen and we will examine the distribution of the income of the income elite of 11 countries. These eleven countries are the United States, United Kingdom, Netherlands, Germany, Canada, France, Australia, Germany, Norway, Sweden, Denmark and Finland. In most existing literature, the measure of inequality is presented with the Gini coefficient (Kenworthy & Pontusson, 2005). The Gini coefficient assigns diminishing weights as incomes rise, which can be seen as an advantage if one is inequality-averse (Weeks, 2005). The major drawback is that it is relatively insensitive to changes in the middle range of a distribution. Many measures are used in empirical work, and our presentation restricts itself to the Gini coefficient, not particularly because of its superiority over other calculations, but because of the frequency of its use and its easiness to understand. Therefore, we will look for the Gini coefficients over time for the different countries. Besides this Gini coefficient, many scholars have described the increased inequality by studying the income distribution for the elite, especially the top 0,1 %, 1 %, 5 % and 10 % of a country. When these groups have acquired a larger peace of the cake, the income inequality will automatically increase. After we described the Gini coefficient, we will look for these shares in each of the country over time. The Gini coefficient is mathematically based on the Lorenz curve, which plots the proportion of the total income of the population that is cumulatively earned by the bottom percentages of the population. The Gini coefficient can then be thought of as the ratio of the area that lies between the line of equality and the Lorenz curve over the total area under the line of equality. The Gini coefficient can range from 0 to 1, or 0 to 100. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality. To be validly computed, no negative goods can be distributed. Thus, if the Gini coefficient is being used to describe household income inequality, then no household can have a negative income. When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same percentage of the total income (G=0). The Gini coefficient's main advantage is that it is a measure of inequality by means of a ratio analysis, rather than a variable unrepresentative of
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most of the population, such as per capita income or gross domestic product. It is sufficiently simple that it can be compared across countries and be easily interpreted. General Domestic Product (GDP) statistics are often criticized as they do not represent changes for the whole population; the Gini coefficient demonstrates how income has changed for poor and rich. If the Gini coefficient is rising as well as GDP, poverty may not be improving for the majority of the population. Therefore, the Gini coefficient can be used to indicate how the distribution of income has changed within a country over a period of time, thus it is possible to see if inequality is increasing or decreasing. To get a clear picture of how the inequality evolved over the last three decades, we used data from the World Institute for Development Economics Research of the United Nations University (UNU-WIDER), but because of lack of data in some years we used linear polation to estimate the years for which we did not have any information for. If we look at the Gini coefficients for the 11 different countries that we selected, we immediately notice three different groups. The first group that we selected is the Anglo-Saxon countries, with Australia, United Kingdom and the United States. If we look at these three countries in Figure 1, we can see that the three countries show the same trend, beginning with a decline of the inequality around the middle of the 1960s for the United States, in the middle of the 1950s for the United Kingdom and in the beginning of the 1950s for Australia. This trend continued till the end of the 1970s and the beginning of the 1980s, where we see a strong increase in the Gini coefficient in all three countries, till the beginning of the 20 th century. In the beginning of the 20th century, we see a small decline for Australia and the United Kingdom, but for the United States of America we see still an increase. What is not in this graph, but nevertheless is very remarkable, is that the United States had a Gini coefficient of 47 (highest every reported) in 2007.
Figure 1: Gini coefficients between 1942 and 2006 for the Anglo-Saxon Countries.
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In Figure 2 we see the Scandinavian countries and their Gini coefficient over the last 60 years. We see that the Scandinavian countries started with a high inequality coefficient after the second world war, but show a strong negative trend; their Gini coefficient declined in 60 years. Especially Sweden showes an enormous decline of the Gini coefficient over these 60 years. The same accounts for Norway and Finland, may it be to a lesser extent. The Gini coefficient of Denmark shows a somewhat different trend, by first showing a minor decline between 1942 and 1966, a small increase between 1966 and 1978, a second somewhat stronger decline between 1978 and 1990, followed by a second, stronger increase between 1990 and 2003. Denmark differs significantly from the other three Scandinavian countries if we compare these trends.
Figure 2: Gini coefficients between 1942 and 2006 for the Scandinavian Countries.
The Other Western Countries show the same pattern as the Scandinavian countries, where it be that they show a somewhat different pattern from the beginning of the 1980s. All four countries show an enormous decline of the Gini coefficient if we compare with the 1940s till the middle of the 1980s. After this decline, we see a small increase in the Gini for Canada, the Netherlands and Germany. France shows the same trend as the Scandanavian countries, from the start of the 1960s till the beginning of the 21th century we see a decline of the Gini coefficient. If we look at the Netherlands, Canada, and Germany, we see that they show a increase from the 1980s and the beginning of the 1990s.
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Figure 3: Gini coefficients between 1942 and 2006 for Other Western Countries
2.2 Top Incomes

We have seen that there are some differences regarding the Gini coefficients between the eleven countries. To study these distributions more specifically, we can also look at the income distribution of the top incomes and try to recognize a pattern. In this section, we want to describe the distribution of the total income over the years between the 1980s till now, looking especially at the incomes of the top 0,1 %, 1 %, 5 % and 10 %. This is importantly because many scholars have found that these groups earn more and more money, while the rest of the society falls behind (Krugman, 2006; Wilterdink, 1995). If we find that these groups show a strong increase in income, we may conclude that these countries are not meritocratic, but oligarchic (Dew-Becker & Gordon, 2005). According to Wilterdink (1995), there is an increase of the socioeconomic inequality in the prosperous societies since the end of the 1970s, especially in the United States. The economic position of large parts of the population deteriorated, mainly the lower income deciles, whereas the already privileged minority improved their position substantially. In the USA, there was a decline of the average real family income of the least earning half of the American population fell by 7 %, and that of the lowest decile by 15 % (Wilterdink, 1995). On the other hand, between 1977 and 1988 the average real after-tax family income of the most prosperous 10 % of the American population rose by 16 %, that of the top 5 % by 23 %, and that of the top 1 % by hardly less than 50 %. Comparable trends took place in other Western countries, for example in Great Britain, where the income of the highest income decile rose by 30 % between 1979 and 1990. In France, Germany, the Netherlands and Sweden we see the same pattern. In the Netherlands between 1983 and 1991 fell the average real
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disposable income of the poorest 20 % by about 10 %, while the average income of the most prosperous 20 % increased with 12,5 %. In the United States the trend towards more inequality increased started earlier and was more profound than on the European continent. Despite the international differences one can speak of one international trend common to western societies in general towards more inequality in the income distribution (Wilterdink 1995). Krugman (2006) described the increased incomes of Americas oligarchs in the New York Times, whereby he stated that the economic growth of the recent decades was distributed mainly under a few lucky ones. From 1972 till 2001, he sees an increase of the income at the 90th percentile of the income distribution of only 34 %, which means that their income increased with 1 % on average each year. The income at the 99th percentile rose with 87 %; the income group at the 99,9th percentile rose with 181 percent; and income at the 99,99th percentile rose 497 % percent. These large differences point out that only a few have profited a lot from the economic growth that we have faced during the last three decades, while many others have seen their income decline, remain stable, or increase with a small percentage. As we have seen, the increased income inequality is very much driven by the top pulling ahead of the rest (Esping-Andersen, 2007). The ratio between the top and the middle decile rose from 1.8 to 2.2 in Britain, from 2.6 to 3.0 in the United States, and from 1,5 to 1.7 in Sweden. The bottom is now losing ground in the United States, Finland, Germany, Sweden, and the United Kingdom, but anything that approximates de factor polarization is limited to the United Kingdom and United States (Esping-Andersen, 2007). Young adults face an erosion of relative wages at all skill levels while being hugely overrepresented among the unemployed and those with precarious, short-term employment contracts (H. Ganzeboom, Kalmijn, & Peschar, 1995). The deteriorating position of young workers in combination with the rise in lone parenthood helps account for growing child poverty. According to calculations by Esping-Andersen (2007), the Scandinavian countries have succeeded in stemming the tide but elsewhere, child poverty has risen sharply; by from 4 to 7 percentage points in Germany, the Netherlands, the United Kingdom; and the United States, starting at a very high level (19 % in 1980), saw child poverty growing an additional 3 points. In contrast, the top earners are leaping ahead in many countries. In Britain and the United States, the topmiddle decile ratio rose by 15 % to 21 %. This happened not only in the three English speaking countries; in the Netherlands and Sweden with 8 %, in Germany with 7 %. Wage erosion at the bottom is less severe and also less common. The bottom decile has lost ground in Germany and Sweden (a 6 % to 7 % decline relative to the middle) and more substantially so in the Netherlands, the United Kingdom, and the United States (a 9 % to 11 % decline). Now we have seen that in the United States and the United Kingdom the top incomes show enormous increases of their income, while the lower incomes have to face a decline or stable income, other countries show a different picture. In the next section we will examine which dynamics and mechanisms can explain these developments.
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3. Theory and Hypotheses

Now we have answered our first research question, we want to examine the explanations of the different trends in income inequality. Coming back to the Greek myth, the Guardian Knot, we want to examine how this knot is made and how we can try to untie it. Put it in a scientific context: we want to describe which macro-indicators can explain the trends in inequality. Therefore, we will tests political, sociological, and economic factors that may contribute to inequality in countries. There have been three basic approaches to the assessment of how global income distribution has evolved in the latest era of globalization (Torres, 2008). The first approach involves a consideration of within-country inequality; this approach takes into account the income distribution within countries using measures such as the Gini index to illustrate the entire income distribution of a country. Recent studies, including this study, find that within-country inequalities have increased over the past two decades or so, especially in the Anglo-Saxon countries. A second way of measuring inequality is the international inequality; this method measures differences in average incomes across countries. There are no references made to income distribution within each country as it is assumed, in this method of measuring inequality, that people have the mean income of their countries. According to Torres (2008), international income inequality has tended to decline. A third approach is global inequality; an approach that takes into account both within- and between country income inequalities. In this section, we will examine the within-country inequalities whereby we will look which factors explain Gini coefficients of the selected countries. This will provide us with an answer on the second and third research questions, respectively which factors explain the Gini coefficients and which factors explain household income in the different countries. For the second question, we will use macro explanations, while we will use household and cross level interactions to examine the third question. We will examine whether the macro-explanations that we assumed to have a relation to the Gini coefficients do have a causal relation with the Gini coefficients for the Anglo-Saxon countries, the Other Western countries, and the Scandinavian countries. Secondly, we will examine factors that underlie the within-country inequality for households, whereby we will examine the factors that explain the income inequality on the household level within Canada, France, United States, United Kingdom, Netherlands, Germany, Sweden, Denmark, Norway, Finland, and Australia, over a time period of three decades, controlled for contextual factors at the country level.
Within-Country Inequality
In this section, we will describe theoretical assumptions and empirical findings that explain the withincountry income inequality. We will start with economic explanations, followed by political explanations, and end with sociological explanations. The explanations that are hypothesized to relate to the increased income inequality are described and translated in hypotheses which we will test in chapter 5. Because we will use different data sets, it might be helpful to explain here that we made a
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differentiation in our hypotheses. Hypotheses that are formulated about the Gini coefficient are hypotheses that we will examine in a regression analysis and are used to test whether these macro variables also influence income on a household level. Hypotheses that are formulated about household income will be tested with multilevel analyses in LIS-files, with macro variables as context effects.
3.1 Economic Explanations

The distribution of income is a key issue for economic scholars. Searching for economic explanations to explain the income inequality brings us to models concerning economic growth, unemployment rates, real wages, productivity, and wage shares. If people want to become more prosperous and wealthier, economic growth is seen as an important factor to achieve this. Economic policy advices politicians to develop a reform that stimulates the economy to grow. This is the main idea behind the great economic reforms that occurred, from socialism to Nazism (Achterhuis, 2008). The same is happening nowadays, where the liberalization of the economy should lead to more economic growth and more wealth (Chang, 2010). The liberalization was implemented to make people run faster, because they would run for their own income, and the faster you ran, the more income you would generate (Achterhuis, 2010; Chang, 2010). This should lead to economic growth, less income inequality, less unemployment, higher real wages, higher productivity, and fairer wage shares (Torres, 2008). Because the income inequality did not decrease, but increased in most of the countries, we will examine the mirror image of economic factors that should lead to less income inequality but led to an increased inequality.
3.1.1 Economic Growth

It is evidently in contrast with the law of nature however one may define - that a child orders a greybeard, that a fool leads the wise, and that a handful of people go beyond abundance, while the mass is suffering from hunger and shortage. (Rousseau, 2003)(own translation) Deininger and Squire (1996) state that there is a systematic link between economic growth and changes in aggregate inequality; like the Gini coefficient. This means that if economy grows, its gross domestic product (GDP) per capita increases, which will lead to more redistribution and will reduce poverty in a country. If the GDP increases, the market value of all final goods and services made within the borders of a country increase. If economies grow, poverty will reduce in a country because the lower deciles earn more, unemployment will be lower and the productivity will increase due to investments (Chang, 2010). When more people are working, tax collection is higher and the social expenditure is lower. When countries grow in economic sense, it will be also more accepted that the government will extend the social welfare to build a stronger safety net for the elderly, sick and unemployed. This will lead to a decrease in the income inequality. Paul Krugman stated it as follows (1990, p.9) Productivity isnt everything, but in the long run it is almost everything. A countrys ability to improve its standard of living over time depends almost entirely on its ability to raise its
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output per worker. The essential arithmetic says that long-term growth in living standards depends almost entirely on productivity growth. When productivity in a country increases, the average production per capita increases, contributing to an economic growth because the price of products will decline and the ability for people to buy commodities increases. The relation between living standards and income is linear, and in most countries with a high income inequality, we also see that more people are living under the poverty line, have a lower life expectancy, poorer physical health, and more violence (Wilkinson & Pickett, 2010). There most of the countries have shown a trend of economic growth over the last three decades, we would expect that the income inequality has decreases over the last three decades (Chang, 2010; DiPrete & Eirich, 2006; Torres, 2008). The hypothesis concerning economic growth is that we expect that economic growth relates negatively with income inequality. According to a wide range of authors, this is where the theoretical assumptions provide us with false predictions of the consequences in real life (Achterhuis, 2010; Dew-Becker & Gordon, 2005; Torres, 2008). A basic tenet of economic science is that productivity growth is the source of growth in real income per capita, which will lead to less income inequality. In a very detailed and thorough research, Dew-Becker and Gordon found that only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth (Dew-Becker & Gordon, 2005). Put it differently, only the most successful people have enjoyed the productivity growth of the society as a whole (Chang, 2010). Just as economic and sociological studies of internal labor markets have been central to the study of wage and earnings inequality, we believe studies of compensation practices at the very top, and corporate governance institutions more generally, should be of increasing relevance to the study of rising income inequality (Wilterdink, 1995). According to Dew-Becker and Gordon (2005), too much emphasis has been placed on skill-biased technical change and too little attention on the incomes of superstars, like the CEOs, sports stars, and entertainment stars. As these economists and sociologists have shown, economic growth is not shaded out evenly. The larger share of the economic growth and the prosperous consequences are mainly distributed to the top of the income population. We therefore hypothesize that economic growth is positively related to income inequality.
3.1.2 Unemployment
In the 1970s, global economic power relations started to change towards less favorable results for the western societies. Rising costs at the one hand, and stagnation of sales due to intensified international competition on the other led to many problems for companies (Judt, 2010b). Internationalization was necessary to survive as a company, moving parts of the production to countries where labor costs were lower. In this period, nothing extraordinary happened with internal economies (Wilterdink, 1995). This changed in the 1980s where many inhabitants became unemployed. Unemployment was rising to double digit levels, employees became more unilaterally dependent on employers for work, and labor
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unions lost power, prestige, and members (Visser, 2010; Visser & Hemerijck, 1998). Policy changes could not reduce the unemployment, but they made rising profits possible. During the recession of the first half of the 1980s, growing unemployment and decreasing investments went hand in hand with growing capital incomes and rising share prices (Wilterdink, 1995). In the second half, growing employment did not result into more equality, because of the stagnation of the real wages in the lower deciles, to compete with countries that have lower labor costs, and social benefits from being cut (Klein, 2007). When the national unemployment rate is high, compared to other years, the pressure to lower the welfare state benefits increases. As more workers in different countries compete for the same jobs, the negative pressure on wages in the comparatively prosperous countries grows, which leads to a decline in wages in the prosperous country (Checchi, Visser, & van de Werfhorst, 2010; Visser, 2010). The costs to take care of the unemployed increased when the total number of unemployed rise, which will enlarge the social expenditure. In times of high unemployment, it is not wise to raise taxes, because this will lead to a decline in the consumption, which will enforce the unemployment rate. This will not be the policy change that people will hope for. What we see in most of the countries nowadays, is that they cut social expenditure. For example, the age of retirement is becoming higher in almost every Western country, the budget for the unemployed is declining, the expenditure for the mentally ill and handicapped decreases. This increase in unemployment will be followed by a retrenchment; otherwise the pressure of a negative account on the general expenditure in a country becomes too great. Especially considering the regulations for participation to the Euro, it is wise to have a balanced national budget. We therefore hypothesize that if the overall unemployment is high, the income inequality will be higher, due to pressure on the welfare state and the need for retrenchment. If the unemployment in a country is high and concentrated among the lower educated, bargaining power for wages and labor conditions for the employees will decline. Earlier experiences suggest that the job losses entailed by systemic financial crisis have been especially strong, with long lasting effects on vulnerable groups. Unemployment will also rise significantly as a result of the investment slump and this may further intensify income inequalities. The supply and demand is unbalanced, where there are many people who want a job, while there are not many jobs to be distributed. This will lead to lower wages, which have to be accepted by the unemployed; otherwise they will have no income at all. To summarize, lower educated will feel being unemployment more intense than people who are higher educated. We therefore hypothesize that, unemployment for lower educated is stronger related to income than the relation between unemployment and income for higher educated.
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3.2 Political Explanations

Concerns about growing inequality in incomes (and also earnings and wealth inequality) have fueled social and political debates in many OECD countries (Gottschalk & Smeeding, 1999). According to a wide range of authors, the political system plays a key role in the inequality in a country (H. Ganzeboom, et al., 1991; Hewitt, 1977a; Iversen & Soskice, 2004; Lenski, 1966, 2005; Ultee, Arts, & Flap, 2003; Van Dam, 2009). Politics and institutions are able to inhibit or facilitate the effects of economy, not only by redistribution of taxes but also by the opportunity to unionize, improve labor relations and labor standards, but also to increase the social safety net for the employed and unemployed (Chang, 2010; Jalee, 1970; Julien, 1969; Visser, 2010; Visser & Hemerijck, 1998). In this section, we will describe how the politics have evolved over the last three decades and which consequences occurred due to these developments, according to the narrative articles and books by many scholars.
3.2.1 Neo-liberalization
We noticed that the Anglo-Saxon countries show an enormous increase in the income inequality during the 1980s till 2006, while the Scandinavian countries and the Other Western Countries do not show this trend and show a minor rise of inequality or a decline in income inequality. The absence of a global pattern is strong prima facie evidence that trends and non-trends reflect policies, not inexorable forces beyond the influence of governments (Weeks, 2005). Countries with centralized wage-setting institutions (Germany, the Netherlands), a high union density and adequate minimum wages (France) contained the pressure towards higher earnings inequality. In contrast, countries with decentralized wage negotiations and flexible labour markets experienced the largest increases in earnings inequality (United States and United Kingdom). An increase of the share of financial rents, urban land rents and profits contributed to the growing dispersion of total incomes. The fairness of the tax and transfer systems declined, as transfers fell relative to gross domestic product and personal income tax became less progressive (Wilterdink, 1995) As we have seen in Figure 1, 2 and 3, there are clear differences in the trends between the Anglo-Saxon countries, the Scandinavian countries, and the Other Western Countries. After World War II, a consensus between the leaders of mainstream parties in the developed countries arose that the two great authorial political systems of the century, fascism and communism, had in no small part arisen from the consequences of instabilities inherent in market economies (Achterhuis, 2010; Weeks, 2005). Soon after the second world war, the prominent economist Rothschild made this connection in what was perhaps the professions leading periodical (Weeks, 2005). The economic journal, wherein he described the tendency towards concentration of economic power in major international markets as the most violent aspect of the oligopolistic struggle, the attempt of the biggest oligopolistic groupings to regroup their forces on a world scale (Rothschild, 1947; p. 318). He went on that Fascism has
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been largely brought into power by (the) struggle of the most powerful oligopolists to strengthen through political action, their position on the labour market and vis--vis their smaller competitors, and finally to strike out in order to change the world market situation n their favour (Rothschild, 1947; p. 318). Rothschilds major fear was that this would occur again if there were no solutions found for the deregulation of the power of oligopolistic market leaders. The commitment of post-war leaders to preventing the international rise of uncontrollable corporate power had its domestic aspect, which was pursued with even greater zeal (Judt, 2010b; Weeks, 2005). Along with the concern that the rise of corporate power was a threat to democratic institutions went the closely linked view that excessive concentrations of private income and wealth was a manifestation of that threat at the household and individual level (Reich, 2007). The primary concern for companies was to make profit, not to take care of their employees and the civilians (Soros, 2008). The broad political support for policies to restrict the concentration of wealth came from strong trade union movements in most of the countries, which, again, at the beginning of the twenty-first century seems an anachronism (Weeks, 2005). In contrast, the rivalry between the Soviet-Union and the United States, between the Communism and Capitalism, reinforced the political commitment in the free world to policies limiting inequality, with the political leadership in Washington recognizing a need to demonstrate the superiority of the market system in providing for the welfare of its citizens, according to the free market principle of Friedman (Achterhuis, 2010; Fukuyama, 2006; Klein, 2007; Weeks, 2005). This is exactly what happened during the end of the 20th century, according to Klein (2002; 2007). The leaders of the United States and the United Kingdom, respectively Ronald Reagan and Margaret Thatcher, reinforced the laissez-faire ideology in the 1970s and 1980s. Many state owned companies became privatized and in the hands of large corporate companies, whereby the main difference lies in the fact that state owned companies focus is to fulfil their duty to take care of the citizens, while privatized companies focus is to make profit, preferable as much as possible. Klein (2002; 2007) argues that the neo-liberalization led to more power for major market leaders and less power to unions and employees in many industrialized countries. The economic reforms that led to a free movement of commodities and of capital resulted in less power for people working in the centre of the economic world. Weeks (2005), postulated that the increased inequality in some countries supports the conclusion that the deregulations of markets, resulting in the concentration of economic power, is the fundamental cause as well as the gross manifestation of inequality of both income and wealth. If this conclusion is true, it should be the case that countries that developed this laissez-faire theory more extensively should have a greater inequality than countries that did this in a lesser extent. According to Klein (2002; 2007) and Weeks (2005), we can conclude that the Anglo-Saxon countries can be divided from the other countries, whereas they have
followed the free market principle in a lesser extent.
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Three important facts that support this theory, concerning that the neo-liberalization of government is an important indicator for the rising inequality, are described by Weeks (2005). The first argument that Weeks (2005) discusses is that it should not be controversial to state that the three Anglo-Saxon countries pursued a broadly similar policy programme that has come to be called neoliberal. All three the countries, United Kingdom, United States, and Australia, followed broadly the same economic and social policies, with labour market deregulation perhaps being the most important policy. This les to a decrease in the share of wage employees in trade unions, the union density. The advantages of unionization for workers, for example, reduction of mutual competition, possibility of collective action, standardization of agreed upon conditions of employment, have no, or limited application at the international level (Checchi, et al., 2010). Unions remain bound and oriented nationally, much more so than corporations. Secondly, the countries that show an enormous increase in especially the 1980s and in the beginning in the 1990s, manifested this broadly similar policy agenda most vigorously in the 1980s and in the beginning 1990s. The last argument is that before this period in each of these countries set pace, the inequality was lower in the period pre-liberalization then it is in the liberalized period. The major instruments that can be used by governments to restrict the accumulation of wealth an income in a few hands are progressive taxation, universal entitlement programmes and collective bargaining. These instruments mediated the link between labour and product market competition and the distribution of income, such as what has happened in the 1950s and 1960s in the Anglo -Saxon countries, and over a longer period in the Western-European and Scandinavian countries. Low crosssectional inequality, low income insecurity, and nevertheless open and dynamic economic structures were thus a joint outcome of, especially, social democratic and corporatist welfare regimes in Europe (Gangl, 2005). But in the years of neo-liberalization, these instruments were regarded as socialist and communistic, like in the Soviet-Union (Judt, 2010b; Rossum, 1984). Empirical evidence supports the view that in countries in which inequality increased, this was primarily the results of the decline in the importance and bargaining power of organized labour, aggravated by unemployment and reductions in government expenditure (Weeks, 2005). Weeks shows us that it is possible to measure the amount of neoliberalistic changes in a country, which would explain the Gini coefficient of a country for 96 percent. On the other side, we see that Esping-Andersen has provided us with proof that having a social-democratic government reduces the inequality. The countries that do have a long tradition in social-democratic governments are Norway, Sweden and Finland. The central question, not only for neo-Marxist, but for the entire contemporary debate on the welfare state, is to what extent, and under what conditions, the class divisions and social inequalities produced by capitalism can be undone by parliamentary democracy (Esping-Andersen, 1990). According to Esping-Andersen (1990), parliamentary class mobilization is a means of the realization of the socialist ideals of equality, justice, freedom and solidarity. In other words, the social safety net will be greater in the Scandinavian
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countries. The social expenditure per habitat is larger than in the Anglo-Saxon countries. Because these Scandinavian countries have a stronger welfare, with progressive tax redistribution and a great social safety net, we argue that the expansion of the welfare state and social services led to a decreased income inequality until the 1980s (Esping-Andersen). In particular, high trade union density, a more
coordinated collective bargaining structure, and greater coverage of collective bargaining agreements tend to be associated with lower inequality. This all have been said, we can state the following expectation: Countries that have implemented a higher degree of neoliberal policy changes, have a higher income inequality than countries that have a lower degree of neoliberal policy changes. The operationalization of the implementations of these neoliberal policy changes will be described in chapter 4, but we will provide a short description of how we will operationalize these implementations. According to the theoretical background, which we have described above, institutional power is an important aspect for explaining income inequality differences between countries (Visser & Hemerijck, 1998). As we have seen, countries with centralized wage-setting institutions (Germany, the Netherlands), a high union density and adequate minimum wages (France) contained the pressure towards higher earnings inequality, while countries with decentralized wage negotiations and flexible labour markets experienced the largest increases in earnings inequality. Declines in the strength of trade unions, especially in the United Kingdom and the United States, leading to a fall in the share of national income going to labour (Weeks, 2005). The power of institutions that is provided by governments is an important aspect of the neoliberal policy changes, which led to major differences between the Scandinavian countries and the Anglo-Saxon countries, whereby institutions in the Scandinavian countries have more power than the institutions in the AngloSaxon countries. This power can be measured in terms of coordination of wage bargaining, government intervention in wage bargaining, dominant levels at which bargaining takes place, minimum wage setting, the involvement of unions and employers concerning preparation, decision and implementation of governments social and policy-making, union density, bargaining coverage, authority of unions regarding wage setting, and the centralisation and coordination of union wage bargaining. This way, we can examine whether differences between the levels of institutional power in the 11 countries have a causal relation with income inequality, measured by the Gini coefficient.
3.2.2 Social Expenditure

Income inequality can be influenced in three different ways. The first one is that income inequality rises when the higher deciles receive a higher income in the next year, while the lower income deciles earn the same every year. This can be influenced by the tax collection (Houben, 1970), which has been reduced in the last decades. The second way, is when the lower income deciles receive less income, especially the very poor in a country who will receive less social benefits, like child care, unemployment compensation, and old age pensions, while the higher income deciles earn the same
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every year. This will also result in a higher income inequality. The last way is when the higher income deciles earn more because of cutback in tax collection, and at the same time, the social benefits are reduced and the lower income deciles earn less (Breen, Luijkx, Muller, & Pollak, 2010). This has been the case in the last few decades (Chang, 2010; Weeks, 2005), whereby the liberal philosophy of responsibility for your own income is implemented more and more, especially in the Anglo-Saxon countries. Collective bargaining for social benefits is become harder due to the pressure for economic growth, the social welfare is considered as a foe. Besides all these discussions, social expenditure will provide the lower income deciles with some extra income that will decrease the gap between the higher income deciles. We therefore hypothesize that the social expenditure is positively related with household income.
3.2.3 Taxation
The redistribution of income is arguably one of the most consequential outcomes of the political process for citizens living conditions (Bradley et al., 2003). Esping-Andersen observed that governments do not spend money just to spend money, but rather do so to affect an outcome, and certainly one of the most important political outcomes is redistribution of income (in Bradley et al., 2003; p 196). Reductions in expenditures on universal social programmes (e.g., unemployment compensation and old age pensions), resulting in declines in transfers from the public budget to lowincome household. These reductions are mostly the case when countries have collected less tax or have budgetary problems. Stephens (1979) finds that social democratic welfare states are more redistributive because taxes are more progressive and transfers more equally distributed. The more a government redistributes incomes, the smaller the gap between rich and poor. The lower deciles will benefit more from social transfers while the upper deciles have to pay a larger percentage of their income. The welfare state is often considered a powerful redistributive instrument (Rousseau, 2008). Social benefits and transfers may help alleviate low-income traps. And, progressive taxation will exert a broader income redistribution effect. This reflects a cut in taxes on high incomes between 1993 and 2007, the average corporate tax rate (for all countries for which data exist) was cut by 10 percentage points (Torres, 2008). In the case of top personal income tax rates, the cut was of 3 percentage points over the same period. Cutting taxes on high incomes or profits can be justified on economic efficiency grounds. They may even meet equity objectives in certain cases the lifting-all-boats effect. However there are other cases where such tax cuts produce sub-optimal results, even when considering efficiency-equity tradeoffs (Klein, 2007; Visser, 2010; Visser & Hemerijck, 1998). Likewise, stronger social protection, if well designed, can serve employment objectives. Finally, taxation has become less progressive in the vast majority of countries and thus less able to redistribute the gains from economic growth (Torres, 2008). We therefore hypothesize that taxation is negatively related to household income.
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3.3 Sociological Explanations 3.3.1 Merits

Rising inequality is often ascribed to technological change. New technologies generate a demand for skills and earnings distribution more skewed than that emanating from old technologies (Breen & Jonsson, 2005, 2007; Breen, et al., 2010; Breen & Salazar, 2010; Dekker & Van Raaij, 2009; Toffler, 1990; Wilterdink, 1985, 1995; Wilterdink & Van Heerikhuizen, 1985). We therefore will look at the effects of education in a country. First we will discuss some of the arguments that have been discussed in the past. In the age of industrialism, following the Second World War, there were relatively many jobs in the middle of the wage distribution, due to the increased production by industrialization (EspingAndersen, 2007; Gangl, 2005). The results was Golthorpes affluent worker or what became to be known as the middle class in North America, a growing number of workers able to achieve a middle class lifestyle (Van Rossem, 1984). According to many sociologists (Myles, 2003), this changed after the 1970s, where the shift from goods to service employment meant the elimination of a large number of manufacturing jobs in the middle of the income distribution and an increase in the number of both low and high paying service jobs (Kenworthy, 2007; Kenworthy & Pontusson, 2005a). The Danish sociologist, Srensen (2007), argued that the changes in the world of organizations have played an important role in driving up the wage inequality. The most popular explanation offered for the increase of wage inequality is the notion of skill-biased technological change. New technologies have led to disproportional increase in demand for highly educated labor (Toffler, 1990). As a consequence, it is not remarkable that most economists and sociologists posit an indirect causal connection between income inequalities and opportunities (Esping-Andersen, 2007). This indirect relation is based on the technical improvements during the recent decades. Physical power, money and military strength are not the most important factors to maintain a position higher in the social hierarchy (Stiglitz, 2002). Knowledge is becoming the most important aspect to control others and to climb up the ladder (Blau & Duncan, 1967; H. Ganzeboom, et al., 1987; Graaf & Luikx, 1995 ). Higher inequality increases the stakes in the competition for good positions (Sorensen, 2005). There is much to gain if you succeed, but also much to lose if you do not (Graaf & Luikx, 1995 ; Lincoln, 2007; Reich, 2007; Reinert, 2007). Neckerman and Torche (2007) show the same in their literature review about the causes and consequences of inequality. Computerization enhanced the productivity of highly educated professionals, undermined the demand for routine cognitive workers usually located in middle-wage jobs, and had relatively little impact on the lowers-skilled blue collar and service occupations located in the lower end of the earnings distribution. This thesis appears consistent with recent earnings trends including the stagnation for workers in the middle of the distribution and rapid growth for highly educated workers. Education is therefore an important factor for explaining which households take place at which positions (Levine, 1998; Rose & Harrison, 2010;
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Rossides, 1997). Studies of how characteristics of the family of origin are associated with educational and labour market outcomes indicate the degree of openness of societies and have a long tradition in sociology. A great deal still remains to be said about class relations within the contemporary societies of Western Europe, Australia, and North America (Wilterdink, 1985). The debates on this topics are still going on, and the ghost of Karl Marx is still hovering about in the background, and sometimes emerges menacingly in the limelight (Wilterdink, 1985; page 83). Karl Marx stated that social class were divided by capital during the industrial revolution (Marx, 2008), where the bourgeoisie were the capitalists and the proletariat were the factory workers. Max Weber argued that exchange relations or markets situations lead to unequal distribution of power, income and political influences (Weber, 2009). Research in social stratification is a very lively area within sociology, being so near the heart of the discipline itself (Breen & Jonsson, 2005). The changes in inequality in the major industrial countries should have led towards a more open society, whereby the merits of people would be the most important indicator of their economic position (Van Dam, 2009). In The State, Plato describes that the most ideal, justice state, is a state where everyone is doing the job that he or she is the best at (Popper, 2003). This perfect state, whereby merits determine ones place in society, is called a meritocratic society. A society is called meritocratic to the extent that merit, defined as IQ plus effort, determines recruitment of individuals to class positions of differing advantage and power (Breen & Goldthorpe, 1999). Breen and Goldthorpe (1999) studied to which extent the British society was a meritocratic society. They concluded that nonetheless class is still important in explaining mobility, it is clear from their analysis that mobility chances are indeed influenced by ability and effort, and in turn it follows that merit, understood in terms of ability and effort, may in some cases enable individuals to overcome the disadvantages of their class origins. The important implication from their study is that while merit certainly influences mobility processes, it appears to be that children from lower social classes have to display far more merit than children from higher social classes (Breen & Goldthorpe, 1999). Increases in inequality reflect characteristics of the economic forces determining growth in the late twentieth century, forces allegedly inherent in that growth, beyond the policy to influence or arrest. Put it another way, increases in inequality represent an irresistible development driven by fundamental technological and demographic forces (Weeks, 2005). The same has been said by Wilterdink (1995), where he states that the formation and increasing significance of market relations is to be regarded as one aspect of these changing relations of interdependence. This increased one-sided interdependence results into more social inequality. Relations of interdependence are also power relations, as Wilterdink explains. As the interdependency becomes more one-sided and less reciprocal, the power balance will be more unequal, resulting into more income inequality. In the
literature there are different viewpoints that have been summarized in a review article by Breen and Jonsson (2005). They state that there are different hypotheses that have been confirmed in different
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countries, which means that in some countries education is more important, while in other countries social inheritance is more important. Much of the rise in earnings inequality can be controlled by policies from the government that facilitate the adjustment of labour supply to the new labour demand pattern. Comparisons between Canada and the United States in the 1980s-1990s show that in the face of rising demand for skilled labour, inequality rose in the United States but not in Canada, as the latter country adopted vigorous policies to subsidize secondary and higher education. In all the industrialized countries that we examine, technological change developed rapidly over the recent decades, where technological skills and specialization is rewarded with a greater income. But the trends in income inequality do not follow the same pattern, which leads to a different conclusion about the explanatory power of educational skills on the increased inequality. According to them, there is a threefold of hypotheses that are examined in a great variety of studies. We will not discuss all these articles; we will remain with the conclusion of Breen and Jonsson (2005). According to them, one hypothesis that can be examined is the modernization hypothesis that states that the effect of origin would decrease, because of the increasing effect of education and the greater need for technological employees. The second hypothesis is the reproduction hypothesis, which states that inequalities may decrease at lower transitions because of educational expansion, but that this would be compensated with increasing effects on later transitions. The third hypothesis is the socialist transformation hypothesis that assumes that there would be an initial reduction in origins effects that would be followed by increased effects as new elites pursued their interests. Breen and Jonsson (2005) state that there is evidence for the equalization effects in the case of Germany, the Netherlands, Sweden, France, and Norway. In the United States and the United Kingdom they found a consistency in the association between social origins and educational attainment, which means that these countries show some support for the reproduction of socialization hypothesis. The ranking of countries according to degree of openness that Jonsson and Breen (2005) constructed shows us that Germany and France tend to represent the rigid pole in such a ranking. The Scandinavian countries appear to be consistently among the most open countries, whereas the Netherlands is becoming more open over the past quarter century. The United States and the United Kingdom are one of the most rigid countries when compared to the European countries. It is not accidental that the American comedian George Carlin said: The reason its called the American Dream is you have to be asleep to believe it. If we translate these findings in hypotheses, w e come to form the modernization hypothesis (Breen & Jonsson, 2005). The modernization hypothesis states that the effect of education and the greater need for technological employees leads to a greater importance for education. Because of the increased need for higher educated and the diminishing need for lower educated, higher educated will have a relative higher income than the lower educated. For example, Harrigan and Baladan (1999) found that skill-biased technological change had a great effect on wage shares. Lemieux (2006) showed that a large fraction of the increasing wage inequality is due to the rising demand for skill and experience. People who have a higher education therefore will be rewarded
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higher, due to the higher labor demand. This implies that households whereby the head of the household is higher educated, earn a higher income than households whereby the head of the household is lower educated.
3.3.2 Changing Demographics

Most explanations of rising income inequality stress technology and labour market change. Here, we focus on women educational attainment, womens employment and assortative mating. There we have seen that the height of education in general is becoming more importantly nowadays, many sociological scholars argued that the educational expansion and labor force participation of women are an important indicator to explain the income inequality (Breen & Salazar, 2010; Esping-Andersen, 2007). Since the technological developments that we faced in the last century, like the washingmachine, vacuum-cleaner, ironer, freezer, and so on, household tasks take much less time then before (Breen & Jonsson, 2007; Chang, 2010). This made household tasks easier and less time consuming. Consequently, women could invest more time in education and start their own career. It is widely believed that this growth in womens educational attainment and their increasing labor force participation led to greater inequality between households in their earning (Breen & Salazar, 2010; Sorensen, 2006). In time when women are secondary earners, their effect on the distribution of household income would be an equalizing one if the women in the lower deciles entered the educational attainment and participated in the labour market. For example EspingAndersen (2007), who examined the effects in Denmark, Sweden, United Kingdom, and The United States. He found that there was an equalizing effect in Denmark, Sweden, and the United States, and a dis-equalizing effect in the United Kingdom. This was also the main reason to promote women educational expansion, to become more independent of their man and to earn their own income. However, as higher proportions of women enter the labour market as equal earners, an accumulation of advantages could take place if these women marry men with a similar educational level and earnings potential (Breen & Salazar, 2010). The mechanisms behind the increased educational attainment of women in industrialized countries are threefold (Breen & Salazar, 2010). First, increasing educational attainment can be expected to lead to greater labour force participation among women, and thus womens earnings may become more important in explaining total inequality, regardless of whether they have an equalizing or dis-equalizing effect. Female labour force participation rates have come to equal or approach those of men in all industrialized countries in the last three decades (Breen & Salazar, 2010). We therefore hypothesize that if women attain more and higher education, this will lead to a higher household income. Second, increasing education and labour force participation may change the distribution of household types which may, of itself, affect inequality. In particular, womens educational expansion is likely to increase the proportion of persons who remain single because of the greater feasibility of establishing a household without a male partner. And if external child care is of high quality, maternal
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employment has no negative effects on child outcomes. The rise in female employment may therefore also help diminish the reproduction of inequalities. Mothers employment is positive for childrens life chances because it minimizes poverty risks (Esping-Andersen, 2007). We therefore hypothesize that labour participation of women has a negative effect on the Gini coefficient. Third, education not only affects womens propensity to marry, but also who they marry. If members of couples tend to have similar characteristics that allow them to get certain returns in the labour market, and if educational homogamy increases, particularly at higher levels of education, then a reinforcement of inequalities could take place. Increases in womens educational attainment, to the extent that these equalize the distribution of education between the sexes, can be expected to increase the proportion of educationally homogenous households. On the other hand, if the educational attainments of both sexes are increasing, the effect on the overall level of homogamy will be indeterminate, but it seems likely that we will observe a declining rate of homogamy among couples with low levels of education and an increasing rate among those with high level (Breen & Salazar). An equalizing effect of womens employment will primarily emerge when lower educated womens labour supply increases rapidly. We therefore hypothesize the following, assortative mating relates positively with the income of a household.
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4. Data and Measurement

Data Description
We retrieved data from a wide range of authors and institutions. We will make a distinction for the measurements for political, economic, and sociological variables. We will start by explaining which data we used for the dependent variable for our analysis on the macro-level, followed by the independent variables. Next, we will explain the Luxembourg Income Study and how we operationalized the variables.
4.1 Dependent Variable

In this study, we used the Gini coefficient as the income inequality measurement. To obtain data for the period between 1960-2004/2007 for Anglo-Saxon countries, Scandinavian countries, and Other Western countries, we used the UNU/WIDER World Income Inequality Database (WIID) on income inequality for developed, developing, and transition countries. We used the household income inequality information for our analyses. Because not every year shows a Gini coefficient calculated from the same data-file, we choose to use only the years from the calculation of one data file and used linear interpolation to estimate the years in between. The Gini coefficients for the United States between 1968-1979 were missing in the UNU-WIDER data files, so we used income data from the U.S. Census Bureau to fill in the gaps between 1968 -1979.
4.2 Independent Variables

4.2.1 Political Characteristics Most information for the political characteristics was retrieved from the ICTWSS (Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts) database, which covers four key elements of modern political economics in advanced free market societies in 34 countries between 1960 and 2007. All the variables were available for every year and every country. This database is composed by Prof. Dr. Jelle Visser, based on a great variety of literature and research. The ICTWSS database covers trade unionism, wage setting, state intervention and social pacts. We will only explain which factors we used for our analyses. For more explanation about the variables we would like to redirect you to the authors of the ICTWSS.
Coordination of Wage Bargaining Data-information about the coordination of wage bargaining was collected from the ICTWSS database. This ordinal variable was operationalized in five levels; which were computed as dummy variables because the variable was not linear. The first level is none of the above, fragmented bargaining, mostly at company level. This dummy variable is the reference category. The second level is coordination of wage bargaining with mixed industry- and firm level bargaining, with weak
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enforceability of industry agreements. The third level is industry bargaining with no or irregular pattern setting, limited involvement of central organizations and limited freedom for company bargaining. The fourth level is mixed industry and economy-wide bargaining; a) central organisations negotiate non-enforceable central agreements (guidelines) and/or b) key unions and employers associations set pattern for the entire economy. The fifth level is economy-wide bargaining, based on a) enforceable agreements between the central organisations of unions and employers affecting the entire economy or entire private sector, or on b) government imposition of a wage schedule, freeze, or ceiling. This classification is based on Kenworthys 5-point classifications of wage setting coordination scores (Kenworthy, 2001a, 2001b). The main difference is that except in the case of direct imposition of wage settlements or in the case of a ban on contract renewals, Visser does not assume that the scale for government intervention in wage bargaining parallels that of wage coordination.
Government intervention in wage bargaining Data-information about government intervention in wage bargaining was collected from the ICTWSS database. Again, this ordinal variable was computed as dummy variables, where we used level 1, none of the above, as reference category. The second level was that government influences wage bargaining by providing an institutional framework of consultation and information exchange, by conditional agreement to extend private sector agreements, and/or by providing a conflict resolution mechanism which links the settlement of disputes across the economy and/or allows the intervention of state arbitrators or Parliament. The third level concerns the government that influences wage bargaining outcomes indirectly through price-ceilings, indexation, tax measures, minimum wages, and/or public sector wages. Level 4 is the government who participates directly in wage bargaining (tripartite bargaining, as in social pacts), level 5 is the government imposes private sector wage settlements, places a ceiling on bargaining outcomes or suspends bargaining.
The dominant level(s) at which wage bargaining takes place This ordinal variable was computed as a dummy variable, whereby we use local or company bargaining as the reference category. The second level is sectoral or industry level, with additional local or company bargaining. The third level is sectoral or industry level, the fourth level is national or central level, with additional sectoral/local or company bargaining. The last level, is national or central level.
Minimum wage setting The minimum wage setting is another ordinal variable which we have recoded as dummy variables. We used (level 0) no national (cross-sectoral or inter-occupational) minimum wage as the reference category. The first level is minimum wages that are set by collective agreement or tripartite wage
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boards in (some) sectors. Level 2 is minimum wages are se by national (cross-sectoral or interoccupational) agreement (autonomous agreement) between unions and employers. Level 3 is national minimum wage is set by agreements (as in 2) but extended and made binding by law or Ministerial decree. Level 4 is national minimum wage is set through tripartite negotiations. Level 5 is national minimum wage is set on fixed rule (index-bases minimum wage) after negotiations or consultation with social partners. Level 6 is national minimum wage is set by governments, but after (non-binding) tripartite consultations. Level 7 is national minimum wage is set by judges or expert committee, as in award-system. Level 8 is national minimum wage that is set by government, without fixed rule.
Routine Involvement This variable considers the routine involvement of unions and employers organisations in the preparation, decision and implementation of governments social and economic policy-making. This variable is constructed in three levels, whereby the first level is that unions and/or employers are not or nearly never involved (through social councils, special committees or pre-parliamentary procedures) in the preparation of and decision-making over public policies in the social-economic domain. The second level is defined as occasionally involved in the routine involvement, and the third level as routinely involved. Because this variable was non-linear related to the Gini coefficient, we computed a dummy variable with the first level as reference category.
Union Density Union density is measured as the net union membership as a proportion wage and salary earners in employment, whereby the scale starts at 0 and ends at 100. The calculation is made on basis of the net union membership (total union membership minus union members outside the active, dependent and employed labour force), divided by wage and salary earners in employment (employed wage and salary workers). The calculations are done by Visser.
Bargaining (or Union) Coverage, Adjusted Bargaining coverage are employees that are covered by wage bargaining agreements as a proportion of all wage and salary earners in employment with the right to bargaining, expressed as percentage, adjusted for the possibility that some sectors or occupations are excluded from the right to bargain. The scale is 0-100.
Formal Authority of Unions Regarding Wage Setting This variable is a summary measure of formal authority of unions regarding wage setting at peak and sectoral level, constructed as the sum of authority of confederation over its affiliates and the authority
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of union (affiliate) over their local or workplace branches and representatives, divided by the maximum score (=20). The scale varies from 0-1.
Centralisation and Coordination of Union Wage Bargaining This variable is a summary measure of centralisation and coordination of union wage bargaining, taking into account both union authority and union concentration at multiple levels. The scale varies from 0-1. The measurement weights the degree of authority or vertical coordination in the union movement with the degree of union concentration or horizontal coordination, taking account of multiple levels at which bargaining can take place and assuming a non-zero division of union authority over different levels.
4.2.2 Economic Characteristics Economic Growth As a measure of economic growth, we used the annual percentage of growth that are provided by the OECD data files. Because the OECD did not provide information for all the years, we also used information from the Statistisches Bundesamt Deutschland, Labour Force Survey for United Kingdom, Australia and Canada, and we used data from ILO(International Labour Organization) to complement data that was missing for some countries. Finally, we still missed data for the years 19601980 for many countries, which we complemented by data that was provided by Cusack (1995). In this article, we found average data for the years 1960-1969 and 1970-1979 (Cusack, 1995). Because we already had information about some of the years in the 70s, we used linear interpolation to estimate the years in between.
Unemployment As a measure of unemployment, we used the annual percentage that are provided by the Worldbank. Unemployment refers to the share of the labour force that is without work but available for and seeking employment. Definitions of labour force and unemployment differ by country. Missing data were complemented by the data from Cusack (1995) and linear interpolation.
4.2.3 Sociological Characteristics Labour Force Participation Women To retrieve the data from the labour force participation of women, we used data from the Worldbank. Data that was missing (especially between 1960-1980) was complemented by data from Cusack (1995) and linear interpolation. Labour force participation rate is the proportion of the population ages 15 and older that is economically active: all people who supply labour for the production of goods and services during a specified period.
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4.2.4 Luxembourg Income Study The primary source of data is from the Luxembourg Income Study (LIS). This dataset has been used frequently for research about household market inequality, redistribution, and the relationship between this market inequality and redistribution in affluent OECD countries (Kenworthy & Pontusson, 2005b). The LIS data is a collection of micro datasets from 37 different countries which focuses on income characteristic of households. Besides income and beneficial variables, household compositions, occupational activities and educational levels of household members are included. Next to the household-level data of LIS, we use context information on the national-level from different datasets, which we have described in the first part of this chapter. Information about women employment, unemployment rates, economic growths rates are derived from the UNU-WIDER World Income Inequality Database (WIID2c) in May 2008, while others are derived from the ICTWSS. Last, the general social expenditure and tax collection is derived from the LIS data. In total, we analyzed data from 11 countries, with 62 year-wave combinations. In Table 1 you can see this.
Table 1: Countries and Waves
Country Australia Canada Denmark Finland France Germany Netherlands Norway Sweden United Kingdom United States 1979 1981 1979 1979 1981 Wave 1 1981 1981 Wave 2 1985 1987 1987 1987 1979/1981 1983/1984 1983/1987 1986 1987 1986 1986 Wave 3 1989 1991 1992 191 1984 1989 1991 1991 1992 1991 1991 Wave 4 1995 1994/1997 1995 1995 1989 1994 1994 1995 1995 1994/1995 1994/1997 Wave 5 2001 1998/2000 2000 2000 1994 2000 1999 2000 2000 1999 2000 Wave 6 2003 2004 2004 2004 2000 2004 2004 2004 2005 2004 2004
4.2.4.1 Dependent Variable

The dependent variable in this study is the household income. Per country, the gross income per household has been standardized. The gross income is defined as the product of total income per year, which includes cash wage and salary income, self-employment income, cash property income and both governmental benefits as pensions. Each household is given a standardized score within the income inequality, which is calculated by formula 1 for each country separately. Formula 1: Household income = Gross income household average income country Standard deviation income country Defining our dependent variable in this way has two major benefits which are important for this study. In the first place, the general effects of household characteristics on the position within the income inequality of a country can be found. A positive effect in the results will explain that a certain
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characteristic has a positive influence on the position within the inequality in a country, and a negative effect has the reverse effect. In the second place, the effects of household characteristics can be compared between countries. By standardizing inequality within countries, the differences between countries such as inequality size, currency rates and purchasing power do not affect the comparability of the findings.
4.2.4.2 Independent Variables

Individual Characteristics The following household characteristics have been taken into account in this research. First, the education level of both the household head and the spouse. The head of the household is the person that earns the highest income, the spouse is the partner of the head. In the LIS data, the determination of the education levels differs between countries. Some have used the ISCED measure, while in other countries the education level is determined by the years of completed education. According to us, the best way to deal with these differences is to standardize the education level per country. Each head and spouse is given a standardized score on their education level which is determined by formula 2. Formula 2: Education level = education level individual average education level country Standard deviation education level country The second characteristic is the number of adults within the household. The measurement in the LIS data has a range of 1 to 13 persons within one household. The distribution of this variable was not normal, and therefore the categories are turned into different variables. The categories between one and four adults are taken separately and all households bigger than four adults are taken together, mainly because of the small numbers of these households. Secondly, the number of earners within each household is taken into account. This variable was also not normal distributed and had a range between zero and ten earners per household. Again the categories between zero and four are taken separately and the rest is turned into a variable of five earners per household or more. Another important variable is the employment status of the head and spouse. The categories between countries of this variable were not the same and therefore the following three categories are created, unemployed, employed and self-employed. Unemployed are those who are out of the labor force and earn no money with work. Volunteer-workers are included into the unemployed category because they earn no money. Employed people are mostly wage workers and self-employed are people with an own business, like farmers, directors, and managers. Due to lack of data we were only able
to estimate the regression coefficients for Model 2a and 2b for some of the waves that included the questions concerning employment status. Other waves were excluded in these Models. The number of children under the age of 18 in the household is also included in the analysis. Different variables have been constructed for households with zero to four children and one variable for households with more than four children. Then, also the sex of the head is taken into account,
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whereby female is the reference category. Last, the age of the household head is constrained between 18 and 60 years old. This is done because we want to focus on the working population within countries. Below the age of 18, people are not likely to earn their own living and people who are over the age of 60 can legally go with retirement in some countries within our analysis. However, the age of the spouse is not restricted in our analysis. In both of the variables, age-groups of five years are clustered, from 18 to 25 up till 60 years for the age of the household head and till the age of 75 for the spouse.
Interactions
To test our hypotheses that concerned interactions, we computer three different interactions. The first concerns assortative mating. We computed this as the interaction between education of the head times the education of the spouse. The second interaction is the interaction between being unemployed and the education of the head. We thereby computed the employment status as unemployed or differently, times being high educated (with low as reference category and the average as the boundary). We computed the same interaction for the spouse.
Country Characteristics
In our analysis, several country characteristic have been taken into account. The effects of the household characteristics will be tested within these country contexts. We will use the indicators that appeared to be strong predictors for the income inequality in our first analyses. Based on these analyses, we used union density, bargaining coverage, authority of unions, centralization of wage bargaining, economic growth, women employment rate, and unemployment rate. These variables appeared to explain the most variance in our first analyses. Next, the average country expenditure on social benefits per country is used. The social expenditure within the country is defined as the average proportion of obtained benefits on the gross income of the household. Secondly, we estimated the tax collection and calculated the average tax collection of a household and used this as a macro-indicator.
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5. Results
We will start by examining the correlations between the independent variables and the Gini coefficient. Because we differentiated the countries in three different groups, we will also examine whether there are differences between the three groups. Secondly, we will examine which macro factors are related with the income inequality in our selected countries. We will differentiate between political, economic, and sociological explanations to solve our Gordian Knot. In the third place, we will examine which factors explain income at the household level. The macro explanations that appear to be significant contributors in the first set of analyses will be used as context effects in our analyses with the LIS-files, which creates a multilevel analyses. If we find in our first analyses that economic growth significantly influences the income inequality, we will use this variable in our analyses with the LIS-files whereby we compute the significant contributors as contextual elements. Our first analyses starts with analysing the Gini coefficient for the eleven selected countries over more than forty year for every country. When we look at the correlations between the macro characteristics and the income inequality, we notice different patterns between the countries. If we look at economic growth, we see that in most countries there is a positive and significant correlation between economic growth and the income inequality, but in some countries there is no significant correlation. For labour force participation of women and unemployment we see an even larger difference between the countries, whereas some countries show a positive significant correlation (Australia, United Kingdom, and United States only for labour force participation of women) and other show negative significant correlations. For the political explanations of income inequality we see strong negative correlations of union density and bargaining coverage, except for Germany and Denmark. If we look at the correlation between authority and the Gini coefficient, we notice that the correlations are negative and significant for Australia, United Kingdom and the United States, and positive and significant for most of the other countries. Centralisation is positively related to the Gini coefficient, except for the United Kingdom, while Wage coordination is negatively related to the Gini coefficient for Australia, United Kingdom and United States, and positively related for the other countries. The same accounts for governmental intervention in wage bargaining.
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Table 1. Zero order correlations between country characteristics and income inequality (Gini) between 1960-2004/2007
Australia (N=45) Economic Characteristics Economic Growth Unemployment Political Characteristics Union Density Bargaining Coverage Authority Centralisation WCoord Govint Level Minimum Wage Sociological Characteristics Labor Force Participation Women .394* (.007) -.686* (.000) -.419* (.005) -.213 -.936* (.000) -.842* (.000) -.715* (.000) -.867* (.000) -.929* (.000) .884* (.000) .676* (.000) -.902* (.000) -.812* (.000) -.839* (.000) .384* (.009) -.403* (.006) -.309* (.039) .197 -.855* (.000) -.708* (.000) -.705* (.000) .816* (.000) .785* (.000) .002 .002 .000 .000 -.266 .066 .127 .204 .447* (.003) .113 .076 .051 -.914* (.000) -.734* (.000) .809* (.000) .686* (.000) .562* (.000) .446* (.000) -.365* (.012) .216 .788* (.000) -.888* (.000) .510* (.000) .700* (.000) .149 .026 .159 .802* (.000) .483* (.001) .806* (.000) .553* (.000) .086 .000 .000 .314* (.036) .000 .713* (.000) -.783* (.000) .842* (.000) .655* (.000) .198 .522* (.000) .665* (.000) -.680* (.000) 0.099 -.801* (.000) .318* (.029) .660* (.000) .191 -.120 .298* (.042) .000 -.835* (.000) -.820* (.000) .811* (.000) .884* (.000) .771* (.000) -.342* (.019) .771* (.000) .000 -.769* (.000) -.881* (.000) -.846* (.000) -.631* (.000) -.544* (.000) -.674* (.000) -.781* (.000) .485* (.001) -.745* (.000) -.765* (.000) -.664* (.000) .889* (.000) -.228 -.535* (.000) 0.000 0.000 .162 .363 * (.014) .420* (.004) -.782* (.000) .108 -.526* (.000) .348* (.016) -.644* (.000) .622* (.000) -.820* (.000) .394* (.007) -.806* (.000) .342* (.019) -.532* (.000) .398* (.006) -.747* (.000) .296* (.043) -.747* (.000) .025 .524* (.000) .043 -.200 Canada (N=44) Denmark (N=46) Finland (N=46) France (N=46) Germany (N=44) Netherlands (N=46) Norway (N=46) Sweden (N=47) United Kingdom (N=47) United States (N=46)
Our second analyses concern the correlations between the groups of countries and the income inequality in these countries. The results are visualized in Table 2. If we look at Table 2, we notice that economic growth relates with the Gini coefficient only for the Western countries. The percentage of women that are participating on the labour market and the unemployment rate is positively related for the Anglo-Saxon countries, while it is negatively related for the Western countries and the Scandinavian countries. Furthermore, we see that the political explanations negatively relate with the Gini coefficient for the Anglo-Saxon countries, while it positively contributes for the Scandinavian countries, and for some of the variables for the Western countries. Except for level and the minimum wage, these are positively related with the Gini coefficient for the Anglo-Saxon countries, while they are not for the Western countries and the Scandinavian countries (except Level for Scandinavian countries). Overall, we see a quite different pattern of correlations between the three different groups. To check for multi-collinearity, we tested whether the theoretical plausibility of the estimated regression coefficients were in the right direction, the significance of the regression coefficients, the inflation of the variance, the tolerance level, the condition number and the variance proportions. After we checked these estimates, we concluded that there was no multi-collinearity between the coefficients. There were no methodological signals that we had to interpret the variables as possible multi-collinearity.
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Table 2: Zero order correlations between groups and income inequality (Gini) between 1960-2004/2007 AngloSaxon Countries Western Countries Scandinavian Countries (N=138) (N=184) (N=184) Economic Growth Labour Force participation Women Unemployment Union Density Bargaining Coverage Authority Centralisation WCoord Govint Level Minimum Wage .142 .652* (.000) .229 *(.007) -.905*(.000) -.798*(.000) -.341*(.000) -.347*(.000) -.472*(.000) -.473*(.000) .486*(.000) .632*(.000) .389*(.000) -.394*(.000) -.609*(.000) .017 .070 .406*(.000) -.095 .040 .194*(.008) .094 -.092 .116 -.472*(.000) -.424*(.000) -.032 .486*(.000) .412*(.000) .572*(.000) .468*(.000) -.337*(.000) .171*(.020) -.156*(.035)
To test our hypotheses we used multiple regression analysis. As we already described before, we divided the countries in three different groups and estimated the coefficients separately. We will start by describing the estimates for the Anglo-Saxon countries. First of all, we notice that economic growth has no effect on the Gini coefficient and that the unemployment rate has a positive and significant effect but this effect disappears when we add the political and sociological explanations. We also noticed that the explanation power is very small, especially when we compare it with the explanation power when we add the other predictors. When we look at the political predictors, we see that the authority of unions relate positively with the income inequality. The formal authority that unions have, regarding wage setting at peak and sectoral level, significantly influences income inequality in these countries. Union density, centralisation of wage bargaining, and governmental intervention in wage bargaining, do not influence the Gini coefficient. We see that the higher levels of coordination of wage bargaining, with fragmented bargaining at the company level as reference category, affect the Gini coefficient significantly, except for the mixed industry and economy-wide bargaining. We also notice that the dominant level of wage bargaining, with local level as reference category, influence the Gini coefficient negatively. When the dominant level of wage bargaining is sectoral/industry level, or national/central level, the smaller the Gini coefficient will be. The minimum wage setting also effects the income inequality in the Anglo-Saxon countries, whereby a minimum wage setting set by collective agreement or tripartite wage boards in sectors, national minimum wage is set on fixed rule, and national minimum wage is set by government, show a positive and significant effect on the Gini coefficient when compared with no national minimum wage as reference category. The explanation power of these indicators is very high, which promotes our idea that these factors are important explanations for the income inequality in the Anglo-Saxon countries. The effect of our sociological explanation, female labour participation is very small and not significant.
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Anglo-Saxon countries
Table 3: Multiple regression analysis with Gini coefficient as independent variable N= 138 Model 1 28.968 (1.670)* Constant Economic Explanations Unemployment .628 (.217)* Economic Growth .599 (.313) Political Explanations Union density Authority Unions Centralisation Wage Bargaining Coordination of Wage bargaining (fragmented bargaining as ref.) Mixed Industry and firm level bargaining Industry Bargaining Mixed Industry and Economy-wide Bargaining Government intervention in wage bargaining (none as ref.) Institutional Framework Price-ceilings, tax measures Direct participation Imposes private sector wage settlements The dominant level of wage bargaining (local level as ref.) Sectoral or industry level National or central level Minimum wage setting (no national minimum wage as ref.) Set by collective agreement or tripartite wage boards in sectors National minimum wage is set on fixed rule National minimum is set by judges or expert committee National minimum wage is set by government Sociological Explanation Female Labour Participation Adj. R2 Model 2 37.346 (2.171)* -.182 (.097)* -.053 (.086) -.080 (.079) 23.394 (7.104)* 5.722 (5.525) 4.251 (1.119)* 5.289 (1.665)* -1.199 (1.427) -.615 (.527) -1.596 (1.371) -2.700 (1.193) -1.255 (.750) -5.825 (1.090)* -3.788 (1.453)* 4.060 (1.109)* 8.147 (1.707)* .825 (.883) 6.567 (.945)* Model 3 37.475 (2.320)* -.178 (.102) -.053 (.087) -.082 (.080) 23.219 (7.214)* 5.995 (5.796) 4.267 (1.128)* 5.312 (1.678)* -1.214 (1.436) -.625 (.533) -1.589 (1.377) -2.714 (1.200) -1.262 (.754) -5.806 (1.101)* -3.750 (1.478)* 4.060 (1.114)* 8.147 (1.714)* .848 (.879) 6.597 (.967)* -0.003 (.019) 0.947
0.064
0.947
In Table 4 we see the regression coefficients for the Western Countries. We notice that the unemployment rate negatively influences the Gini coefficient and remains when we add other variables to our models. We also see that economic growth is positively related to the Gini coefficient in Model 1, but that this effect disappears when we add other variables to our models. Remarkable is that the explanation power of these two economic explanations is much larger than in the models that we tested in the Anglo-Saxon countries. When we look at the political predictors, we see that the union density is significant in Model 2 but not in Model 3, which is remarkable. Bargaining coverage, authority of unions and the centralisation wage bargaining are not significant. In contrast, coordination of wage bargaining is significant when we use fragmented bargaining as reference category. Mixed industry and firm level bargaining, industry bargaining, mixed industry and economy-wide bargaining influence the Gini coefficient positively. The governmental intervention in wage bargaining (none as reference category) influence the Gini coefficient in the opposite direction. When the government provides an institutional framework, or price ceilings and tax measures, or direct participation, or imposes private sector wage settlements, it influences the income inequality negatively when we compare it with no intervention. The higher the dominant level of wage bargaining, the higher the income inequality in the Western Countries, when we use local level as reference category. If we look at the minimum wage setting, whereby we use collective agreement as reference category, we see that
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national minimum wage that is set through tripartite negotiations, or by government after tripartite consultation, or by government without fixed rule, influence negatively the income inequality. In the Western countries we see a negative effect of female labour participation.
Western Countries
Table 4: Multiple regression analysis with Gini coefficient as independent variable N=184 Model 1 36.435 (.875)* Constant Economic Explanations Unemployment -.784 (.088)* Economic Growth .570 (.168)* Political Explanations Union density Bargaining Coverage Authority Unions Centralisation Wage Bargaining Coordination of Wage bargaining (fragmented bargaining as ref.) Mixed Industry and firm level bargaining Industry Bargaining Mixed Industry and Economy-wide Bargaining Economy-wide bargaining Government intervention in wage bargaining (none as ref.) Governmental Institutional Framework Price-ceilings, tax measures Direct participation Imposes private sector wage settlements The dominant level of wage bargaining (local level as ref.) Sectoral or industry level, with additional local or company Sectoral or industry level National or central level with additional sectoral/local or company National or central level Minimum wage setting ( minimum wage set by col. Agree. as ref.) National agreement between unions and employers Set by national agreement extended and binding by law National min. wage is set through tripartite negotiations National min. wage is set by government, after tripartite consultation National minimum wage is set by government without fixed rule Sociological Explanation Female Labour Participation Adj. R2 0.402 Model 2 28.997 (4.860)* -.717 (.083)* .091 (.117) .117 (.058)* -.062 (.039) 5.801 (4.116) -.357 (6.160) 12.642 (3.877)* 13.993 (4.028)* 11.593 (3.691)* 15.347 (4.698) -19.735 (4.246)* -15.047 (4.200)* -11.825 (4.079)* -15.479 (4.887)* 16.847 (2.881)* 14.411 (2.949)* 7.106 (2.563)* 10.753 (3.180)* .618 (1.876) -2.850 (2.622) -5.366 (1.013)* -3.425 (1.276)* -3.870 (1.616)* Model 3 39.305 (5.132)* -.598 (.078)* .010 (.107) .022 (.055) -.058 (.036) 1.886 (3.783) .516 (5.578) 16.062 (3.729)* 16.294 (3.846)* 15.034 (3.588)* 17.132 (4.412)* -18.934 (4.056)* -17.328 (4.004)* -13.087 (3.930)* -17.328 (4.585)* 16.791 (2.608)* 13.670 (2.672)* 6.714 (2.321)* 11.291 (2.880)* .592 (1.698) -4.116 (2.419) -3.943 (.947)* -1.792 (1.187) -6.746 (1.844)* -0.192 (.032)* 0.838
0.803
In Table 5 we see the regression coefficients for the Scandinavian countries. We notice that the effect of unemployment is negative and significant in the first model, but that this changes when we add the political indicators. The effect of economic growth is not significant. The explanation power of this model is much larger than the explanation power of the first model in the Anglo-Saxon countries. We further see that every political indicator influences the income inequality, except the minimum wage setting. The reason that this effect fails to appear can be because there is small variations in these countries. Bargaining coverage and authority unions negatively relate to the income inequality, while the centralisation of wage bargaining positively affects the income inequality. The coordination of wage bargaining levels, mixed industry and economy wide bargaining influence the Gini coefficient positively, when we use industry bargaining as reference category. The levels of governmental intervention in wage bargaining negatively relate to the Gini coefficient, compared to institutional frameworks that we used as reference category. The dominant level of wage bargaining relate
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negatively with income inequality, with sectoral or industry level with additional local or company bargaining as reference category. This means that the higher the level, compared to the reference level, the lower the Gini coefficient. Furthermore, we see that the effect of female labour participation is negative on the income inequality in the Scandinavian countries. The explanation power of all these indicators is lower than the explanation power in the Anglo-Saxon countries, but it is still quite large.
Scandinavian Countries
Table 5: Multiple regression analysis with Gini coefficient as independent variable N=184 Model 1 36.944 (1.310)* Constant Economic Explanations Unemployment -1.023 (.168)* Economic Growth .170 (.243) Political Explanations Union density Bargaining Coverage Authority Unions Centralisation Wage Bargaining Coordination of Wage bargaining (industry bargaining as ref.) Mixed industry and economy-wide bargaining Economy-wide bargaining Government intervention in wage bargaining (instit. Frame. as ref.) Governmental price-ceilings, tax measure Direct participation of the government Imposes private sector wage settlements The dominant level of wage bargaining (level 2 as ref.) Sectoral or industry level National or central level with additional sectoral/local or company National or central level Minimum wage setting (by collective agreement as ref.) Set by national agreement Sociological Explanation Female Labour Participation Adj. R2 0.172 Model 2 82.173 (8.459)* -.086(.181) .098 (.168) .013 (.069) -.498 (.075)* -65.492 (13.185)* 52.765 (13.185)* 3.534 (1.382)* 5.497 (1.471)* -10.741 (1.503)* -9.535 (1.479)* -10.835 (1.786)* -7.306 (3.321)* -9.601 (3.544)* -9.175 (3.525)* -1.037 (1.152) Model 3 86.587 (8.255)* -.093 (.174) -.038 (.165) .041 (.066) -.439 (.073)* -41.199 (12.195)* 42.922 (13.810)* 3.639 (1.323)* 5.477 (1.409)* -11.269 (1.445)* -9.482 (1.417)* -11.173 (1.712)* -7.048 (3.180)* -9.481 (3.394)* -9.328 (3.375)* -1.159 (1.103) -0.147 (.037)* 0.703
0.675
Household Income In the next section, we will try to get some insight in why household have a particular income. Now we have found that union density, bargaining coverage, authority of unions, centralization of wage bargaining, economic growth, women employment rate, and unemployment rate, are important indicators to explain income inequality. These macro characteristics will be added to our models to check whether contextual variables have influences on household income. Because our first analyses show that the Gini coefficient can be explained by political, economic, and sociological indicators, we do not know anything about the explanations of income at the household level. We want to answer the question who gets what and why, for example through education, or through employment. To answer this question, and to unravel the Gordian Knot, we should try to find out characteristics that can explain income at the household level. We will do this by testing data from the LIS-files with multilevel regression analyses, whereby we will add the macro explanations for the income inequality as contexts for household incomes. After we have examined why a household holds a certain position, we will try to link these causes back to the trend towards more inequality, by looking at trends at the macro level that can be linked to the characteristics that explain income. We will look for sociological,
Pagina 40
economic, and political reasons that can explain the position of a household. Because different trends have been the case in the different countries, we will test our hypothesis separately for each country.
United States When we look at the multilevel regression analysis for household incomes in the United States, we notice that in the first model, education has a positive effect on household income, for the education of the head of the household as well as for the education of the spouse. These effects remain positive and significant if we add other variables to our models. We also see that the interaction effect of education head versus education spouse is significant, which stays positive and significant in all the models. Furthermore, we see that age is positively related with household income, compared to the reference category 18-30 years. The same is found for the age of the spouse. Men earn a higher income than female, but this effect is not found in models 2a, 2b and 3b. In Model 2b we notice that the employed and self-employed head of the household earn a higher income than when the head is unemployed, the same accounts for the employed spouse. We also see that the effect of being unemployed is less strong for the higher educated compared to lower educated. We find the same effects for the spouse. In Model 3a, we added macro variables, whereby we find a negative effect of economic growth and a positive effect for unemployment rate. In our last Model 3b, we see that union density and tax have a negative effect on household incomes, while bargaining coverage, and authority, have a positive effect on household income.
Pagina 41
Table 6: Multilevel Regression Analyses for Household Incomes in the United States N = 133438, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.787 (.016)* -.869 (.024)* -.891 (.034)* -.772 (.028)* Age head (18-30 = ref) 30 45 years .199 (.009)* .170 (.013)* .165 (.013)* .190 (.019)* 45 61 years .295 (.010)* .249 (.016)* .240 (.016)* .289 (.023)* Children (0 children = ref) 1 child .209 (.014)* .078 (.021)* .086 (.021)* .186 (.014)* 2 children .071 (.010)* .035 (.016)* .038 (.016)* .062 (.011)* 3 children -.091 (.013)* -.068 (.020)* -.073 (.020)* -.078 (.014) 4 children -.133 (.017)* -.085 (.027)* -.094 (.027)* -.127 (.018)* 5 or more children -.179 (.021)* -.174 (.035)* -.182 (.034)* -.178 (.024)* Education head .242 (.003)* .053 (.007)* .067 (.007)* .238 (.003)* Gender head (female = ref) Man .058 (.006)* .003 (.008) -.011 (.008) .044 (.007)* Adults (2 adults = ref) 1 Adult -.216 (.021)* -.249 (.045)* -.448 (.045)* -.222 (.029)* 3 Adults .103 (.010)* .064 (.016)* .070 (.016)* .093 (.011)* 4 Adults .217 (.013)* .137 (.020)* .145 (.021)* .193 (.014)* 5 or more adults .304 (.018)* .214 (.027)* .227 (.028)* .266 (.019)* Earners (1 earner = ref) 0 earners -.765 (.017)* -.726 (.025)* -.682 (.030)* -.763 (.019)* 2 earners .225 (.006)* .204 (.009)* .177(.012)* .228 (.012)* 3 earners .167 (.009)* .149 (.013)* .147 (.013)* .161 (.020)* 4 earners .311 (.014)* .237 (.022)* .234 (.023)* .314 (.015)* 5 or more earners .653 (.027)* .477 (.045)* .476 (.045)* .648 (.029)* Age spouse (18-30 = ref) 30 45 years .156 (.008)* .124 (.012)* .123 (.012)* .158 (.008)* 45 61 years .196 (.010)* .187 (.015)* .184 (.015)* .199 (.011)* Education spouse .197 (.004)* .458 (.010)* .476 (.011)* .202 (.004)* Employment head (unemployed = ref) Employed .051 (.013)* Self-employed .130 (.017)* Employment spouse (unemployed = ref) Employed .055 (.018)* Self-employed .009 (.022) Interaction Education head * education spouse .130 (.003)* .253 (.006)* .245 (.006)* .128 (.003)* Education Head*Unemp. (low = ref) -.065 (.010)* Education Spouse*Unemp.(low=ref) -.082 (.019)* Economic Characteristics Economic Growth -.010 (.002)* Unemployment rate .010 (.003)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .256 .238 .240 .258 = We excluded some waves due to missing values, the total number of respondents in this model are 59270.
Model 3b -8.825 (.754)* .150 (.009)* .233 (.010)* .178 (.022) .063 (.010)* -.077 (.013) -.092 (.017)* -.105 (.023)* .179 (.003)* .002 (.007) -.220 (.027)* .139 (.010)* .265 (.013)* .374 (.018)* -.506 (.018)* .165 (.006)* .139 (.008)* .282 (.014)* .608 (.027)* .129 (.008)* .172 (.010)* .203 (.004)*
.108 (.003)*
-.753 (.059)* .609 (.048)* .658 (.208)* -.189 (.326) .579 (.828) -.219 (.018)* .345
Australia When we look at the results for Australian households, we see that education of the head and the spouse relate positively with household income. These effects remain significant over the models. When we look at the interaction effect of education, we notice that this effect is positive and significant in all the models. Assortative mating is positively related with household income, although it is very small in our last Model. In Model 2b we added the employment status of the head and the spouse to our models, and we noticed that both the employed head as the employed spouse have a
Pagina 42
higher income than those who are unemployed. For the self-employed we find no relation. The effects of being unemployed are stronger for the lower educated than for the higher educated, for the head of the household as for the spouse. In Model 3a we see that economic growth and unemployment rate are negatively related to household income in Australia. In our last Model, we see that union density and centralisation of wage bargaining are negatively related with household income, while centralisation is positively related with the Australian household incomes. Furthermore, we notice that the explanation power is very high in the last Model, especially when we compare it to the other Models.
Table 7 : Multilevel Regression Analyses for Household Incomes in Australia N = 30140, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.031 (.111) .215 (.391) -.224 (.391) .403 (.116)* Age head (18-30 = ref) 30 45 years .127 (.020)* .087 (.039)* .103 (.038)* .134 (.020)* 45 61 years .133 (.025)* .124 (.046)* .160 (.045)* .140 (.027)* Children (0 children = ref) 1 child -.384 (.030)* -.205 (.038)* -.203 (.038)* -.378 (.023)* 2 children -.655 (.024)* -.317 (.051)* -.319 (.052)* -.633 (.030)* 3 children -.928 (.030)* -.445 (.073)* -.475 (.074)* -.895 (.041) 4 children -.897 (.039)* -.268 .086)* -.280 (.086)* -.857 (.049)* 5 or more children -.984 (.075)* -.775 (.324)* -.852 (.320)* -.875 (.075)* Education head .175 (.001)* .046 (.001)* .089 (.001)* .126 (.001)* Gender head (female = ref) Man .266 (.110)* .442 (.390) .441 (.348) .318 (.110)* Adults (2 adults = ref) 1 Adult -.249 (.131) -.357 (.123)* -.448 (.131)* -.222 (.005)* 3 Adults .312 (.023)* .191 (.038) .187 (.038)* .304 (.038)* 4 Adults .629 (.030)* .360 (.050) .348 (.051)* .607 (.029)* 5 or more adults .940 (.039)* .466 (.068)* .481 (.070)* .903 (.039)* Earners (1 earner = ref) 0 earners -1.009 (.021)* -1.125 (.036)* -.966 (.055)* -1.028 (.021)* 2 earners .509 (.013)* -.507 (.022)* -.506 (.032)* -.520 (.013)* 3 earners .180 (.023)* .285 (.037)* .272 (.037)* .201 (.023)* 4 earners .657 (.039)* .636 (.059)* .644 (.060)* .398 (.039)* 5 or more earners .733 (.080)* .989 (.125)* .963 (.124)* .700 (.081)* Age spouse (18-30 = ref) 30 45 years .117 (.018)* .032 (.034) .052 (.034) .118 (.018)* 45 61 years .086 (.024)* .034 (.043) .062 (.042) .081 (.024)* Education spouse .080 (.009)* .180 (.029)* .287 (.032)* .080 (.009)* Employment head (unemployed= ref) Employed .290 (.043)* Self-employed -.048 (.048) Employment spouse (unemployed=ref) Employed .234 (.058)* Self-employed .093 (.066) Interaction Education head * education spouse .013 (.001)* .029 (.001)* .020 (.001)* .182 (.013)* Education Head*Unemp.(low =ref) -.039 (.002)* Education Spous*Unemp.(low=ref) -.006 (.001)* Economic Characteristics Economic Growth -.056 (.011)* Unemployment rate -.039 (.007)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .197 .232 .252 .200 = We excluded some waves due to missing values, the total number of respondents in this model are 10663. Model 3b -1.437 (.151)* .008 (.013) .088 (.016)* .683 (.003) .316 (.016)* -.333 (.020) -.180 (.026)* -.154 (.045)* .070 (.001)* .075 (.003)* -.220 (.005)* .075 (.004)* .169 (.006)* .210 (.011)* -.332 (.015)* -.289 (.008)* .211 (.015)* .341 (.026)* .645 (.052)* .008 (.019) -.018 (.016) .204 (.006)*
.004 (.001)*
-.009 (.003)* .000 (.002) 1.282 (.336)* -.446 (.079)* .171 (.022)* -.093 (.046) .663
Pagina 43
United Kingdom When we look at the analyses that we conducted for the households in the United Kingdom, we see that the effect of education of the head and the spouse is both positive and significantly related with household income in every Model. Because we see this effect in the United States and in Australia, we do not think that it is remarkable, but what we see is that in all three Anglo-Saxon countries, we find a positive affect of education on household income. Gender is positively related with income, which means that men earn more income than women. Furthermore, we see that the effect of assortative mating is positively related with household income in every Model. People who marry with the same education are better off when they are both highly educated, while they are worse off if they are both low educated. These effects may stimulate the income inequality, as we have seen in earlier analyses. The interaction effect of education and unemployment is negative and significant, which means that the effect of being unemployed is stronger for the lower educated than for the higher educated, not only for the head but also for the spouse. In Model 3a, macro factors are introduced, whereby economic growth and unemployment have a negative effect on household income. Union density and centralization have a positive effect on household income, while tax and bargaining coverage have a negative effect on household income. These effects are shown in Table 8.
Pagina 44
Table 8 : Multilevel Regression Analyses for Household Incomes in the United Kingdom N = 54309, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.100 (.021)* -.090 (.020)* -.130 (.021) -.264 (.036)* Age head (18-30 = ref) 30 45 years .174 (.018)* .155 (.017)* .152 (.011)* .195 (.019)* 45 61 years .252 (.022)* .244 (.021)* .233 (.014)* .283 (.023)* Children (0 children = ref) 1 child -.190 (.021)* -.129 (.020)* -.134 (.021)* -.180 (.013)* 2 children -.302 (.030)* -.183 (.028)* -.187 (.030)* -.276 (.019)* 3 children -.439 (.044)* -.231 (.042)* -.229 (.045)* -.408 (.030) 4 children -.477 (.053)* -.271 (.050)* -.283 (.054)* -.436 (.037)* 5 or more children -.429 (.070)* -.239 (.067)* -.192 (.074)* -.389 (.072)* Education head .280 (.008)* .243 (.008)* .287 (.009)* .293 (.008)* Gender head (female = ref) Man .114 (.016)* .091 (.015)* .064 (.015)* .021 (.017)* Adults (2 adults = ref) 1 Adult -.249 (.089)* -.295 (.084)* -.448 (.085)* -.222 (.091)* 3 Adults .113 (.020)* .077 (.019) .076 (.020)* .104 (.021)* 4 Adults .280 (.029)* .188 (.027) .188 (.029)* .257 (.030)* 5 or more adults .434 (.041)* .239 (.039)* .235 (.042)* .404 (.042)* Earners (1 earner = ref) 0 earners -.932 (.019)* -.807 (.018)* -.812 (.014)* -.947 (.019)* 2 earners .391 (.012)* .340 (.011)* .381(.019)* .411 (.012)* 3 earners .172 (.019)* .144 (.018)* .270 (.033)* .166 (.020)* 4 earners .304 (.034)* .295 (.032)* .547 (.085)* .299 (.035)* 5 or more earners .583 (.089)* .545 (.084)* .572 (.042)* .608 (.091)* Age spouse (18-30 = ref) 30 45 years .127 (.016)* .111 (.015)* .126 (.016)* .139 (.017) 45 61 years .109 (.020)* .103 (.019)* .133 (.020)* .133 (.021) Education spouse .090 (.006)* .090 (.006)* .102 (.008)* .139 (.007)* Employment head (unemployed = ref) Employed .265 (.024)* Self-employed -.045 (.015)* Employment spouse (unemployed = ref) Employed .106 (.024)* Self-employed .045 (.016)* Interaction Education head * education spouse .022 (.002)* .021 (.002)* .029 (.002)* .030 (.002)* Education Head*Unemp. (low = ref) -.152 (.018)* Education Spouse*Unemp.(low=ref) -.106 (.013) Economic Characteristics Economic Growth -.093 (.018)* Unemployment rate -.070 (.005)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .130 .116 .135 .196 = We excluded some waves due to missing values, the total number of respondents in this model are 50937.
Model 3b -1.254 (.068)* .195 (.019)* .283 (.023)* -.180 (.022)* -.277 (.031)* -.408 (.045)* -.436 (.055)* -.380 (.072)* .297 (.008)* .032 (.018)* -.220 (.091)* .104 (.021)* .257 (.030)* .402 (.043)* -.938 (.019)* .411 (.012)* .166 (.020)* .298 (.035)* .606 (.091)* .139 (.010) .134 (.012) .137 (.007)*
.030 (.002)*
.056 (.006)* -.019 (.003)* .385 (.132)* .579 (.828) -.794 (.000)* .135
Canada
If we look at the results for Canada, we see that education is positively related with household income, for as well as the head as the spouse. Man earn more than women. The interaction effect of the education of the head and the spouse is significant and positive. In Model 2b we see that if the head of the household is employed, the household income is higher than when the head is unemployed. For the spouse we see the same effects. When the spouse is self-employed, we see a negative effect on income. Furthermore, we see that the effect of unemployment is stronger for the higher educated if the
Pagina 45
head is unemployed, for the spouse we see an effect in the other direction. In Model 3a we see a positive effect of economic growth and unemployment rate. Union density, authority, and centralisation are positively related with household income, while social security and tax have a negative effect on household income.
Table 9: Multilevel Regression Analyses for Household Incomes in Canada N = 121047, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.726 (.018)* -.723 (.023)* -.419 (.024) -.815 (.027)* Age head (18-30 = ref) 30 45 years .227 (.010)* .248 (.013)* .240 (.013)* .225 (.010)* 45 61 years .310 (.012)* .357 (.016)* .347 (.016)* .310 (.012)* Children (0 children = ref) 1 child .209 (.015) .174 (.019)* .155 (.019)* .207 (.015)* 2 children .032 (.012)* .012 (.015)* .003 (.015)* .032 (.012)* 3 children -.108 (.015)* -.077 (.020)* -.069 (.020)* -.108 (.015) 4 children -.123 (.019)* -.070 (.029)* -.071 (.029)* -.120 (.019)* 5 or more children -.202 (.023)* -.135 (.046)* -.126 (.045)* -.195 (.023)* Education head .178 (.004)* .176 (.005)* .142 (.006)* .176 (.004)* Gender head (female = ref) Man .309 (.009)* .296 (.010)* .162 (.011)* .308 (.010)* Adults (2 adults = ref) 1 Adult -.249 (.131)* -.357 (.021)* -.448 (.131)* -.222 (.005)* 3 Adults .152 (.011)* .138 (.014) .129 (.038)* .153 (.011)* 4 Adults .269 (.015)* .238 (.019) .220 (.051)* .269 (.015)* 5 or more adults .385 (.020)* .309 (.027)* .285 (.070)* .386 (.020)* Earners (1 earner = ref) 0 earners -.933 (.017)* -.853 (.021)* -.985 (.021)* -.933 (.017)* 2 earners -.359 (.007)* -.397 (.010)* -.467 (.010)* -.355 (.007)* 3 earners .212 (.009)* .185 (.012)* .192 (.012)* .213 (.009)* 4 earners .471 (.015)* .449 (.019)* .460 (.019)* .471 (.015)* 5 or more earners .827 (.029)* .822 (.039)* .834 (.039)* .872 (.029)* Age spouse (18-30 = ref) 30 45 years .131 (.009)* .139 (.015)* .140 (.012) .129 (.009)* 45 61 years .186 (.012)* .191 (.012)* .203 (.015) .184 (.012)* Education spouse .171 (.004)* .165 (.005)* .227 (.006)* .176 (.004)* Employment head (unemployed = ref) Employed .157 (.009)* Self-employed -.013 (.014) Employment spouse (unemployed = ref) Employed .142 (.010)* Self-employed -.350 (.015)* Interaction Education head * education spouse .094 (.003)* .124 (.004)* 0.130 (.004)* .094 (.003)* Education Head*Unemp. (low = ref) .032 (.008)* Education Spouse*Unemp.(low=ref) -.034 (.009) Economic Characteristics Economic Growth .007 (.001)* Unemployment rate .008 (.002)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .236 .220 .233 .236 = We excluded some waves due to missing values, the total number of respondents in this model are 75719 Model 3b -2.408 (.168)* .187 (.009)* .266 (.011)* .251 (.014) .058(.011)* -.140 (.014) -.130 (.018)* -.178 (.021)* .131 (.004)* .140 (.010)* -.220 (.005)* .182(.010)* .318 (.014)* .492 (.019)* -.647 (.016)* -.330 (.006)* .204 (.009)* .456 (.014)* .800 (.027)* .011 (.008) .164 (.011) .164 (.004)*
0.097 (.003)*
.069 (.025)* -.024 (.023) .931 (.364)* .440 (.206)* -4.241 (.522)* -.025 (.019) .329
The Netherlands In the Netherlands, we see a positive effect of education on household income, for the head of the household as for the spouse. Man earns more than women. The interaction between education of the head and the spouse is also positively related to household income. We furthermore see that employed
Pagina 46
people earn a higher income than people who are unemployed, and for the spouse we see that selfemployed is positively related with household income when we compare it to being unemployed. The effect of being unemployed is stronger for people who are higher educated, for the head as for the spouse. In Model 3a, we see that economic growth and unemployment rate are negatively related to household income. In the last Model, we see that bargaining coverage, authority and centralization are negatively related to household income, while union density and tax are positively related.
Table 10 : Multilevel Regression Analyses for Household Incomes in the Netherlands N = 17674, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant .284 (.079)* .304 (.119)* .140 (.062)* .629 (.057)* Age head (18-30 = ref) 30 45 years .135 (.079)* .409 (.128)* .366 (.067)* .316 (.036)* 45 61 years .029 (.101)* .484 (.160)* .447 (.084)* .412 (.047)* Children (0 children = ref) 1 child -.615 (.092)* -.467 (.147)* -.242 (.030)* -.063 (.042) 2 children -1.163 (.122)* -.612 (.208)* -.283 (.030)* -.054 (.057) 3 children -1.632 (.182) -.751 (.335)* -.186 (.174) -.296 (.086)* 4 children -.1.995 (.233) -1.161 (.402)* -.435 (.209)* -.284 (.109)* 5 or more children -1.587 (.339) -.532 (.538) -.100 (.278) -.267 (.157)* Education head .206 (.025)* .279 (.042)* .281 (.025)* .294 (.011)* Gender head (female = ref) Man .156 (.060)* .097 (.018)* .101 (.046)* .076 (.029)* Adults (2 adults = ref) 1 Adult -.249 (.054)* -.366 (.021)* -.401 (.131)* -.222 (.055)* 3 Adults .645 (.088)* .460 (.140) .259 (.073)* .104 (.041)* 4 Adults 1.151 (.118)* .537 (.203) .329 (.106)* .215 (.055)* 5 or more adults 1.802 (.169)* .961 (.320)* .390 (.166)* .322 (.080)* Earners (1 earner = ref) 0 earners -.287 (.098)* -.918 (.182)* -1.372 (.099)* -1.155 (.046)* 2 earners .220 (.046)* .345 (.079)* .510 (.042)* -.615 (.022)* 3 earners .257 (.097)* .094 (.138) .056 (.071) .278 (.045)* 4 earners .465 (.165)* .073 (.234) .265 (.121)* .554 (.076)* 5 or more earners .208 (.384) .962 (.522)* .817 (.267)* 1.192 (.178)* Age spouse (18-30 = ref) 30 45 years -.084 (.072) -.018 (.117) -.011 (.062) .206 (.033)* 45 61 years -.073 (.098) .124 (.152) -.060 (.080) .272 (.045)* Education spouse .245 (.027)* .667 (.048)* .164 (.028)* .099 (.012)* Employment head (unemployed = ref) Employed .823 (.047)* Self-employed .229 (.128) Employment spouse (unemployed = ref) Employed .323 (.047)* Self-employed .609 (.154)* Interaction Education head * education spouse .112 (.022)* .137 (.041)* .078 (.022)* .012 (.010) Education Head*Unemp. (low = ref) .259 (.040)* Education Spouse*Unemp.(low=ref) .119 (.047)* Economic Characteristics Economic Growth -.916 (.015)* Unemployment rate -.032 (.004)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .138 .099 .172 .179 = We excluded some waves due to missing values, the total number of respondents in this model are 10209 Model 3b .432 (.069)* .260 (.025)* .380 (.032)* -.070 (.029)* -.077(.040) .026 (.060) .021 (.075) .167 (.108) .242 (.008)* .003 (.023) -.220 (.085)* .156 (.022)* .303 (.030)* .508 (.041)* -1.094 (.032)* .491 (.015)* .174 (.031)* .399 (.053)* .899 (.122)* .206 (.023) .281 (.031) .154 (.009)*
0.015 (.007)*
.023 (.016) -.441 (.006)* -1.672 (.580)* -1.101 (.398)* .655 (.880) .638 (.084)* .195
Pagina 47
Germany The effects that we have found for the Netherlands are quite the same for Germany, where education contributes positively to household income, for both the head and for the spouse. The effect of assortative mating is positively affecting household income, and men earn more than women. We further notice that employment status shows a positive effect of being employed or self-employed for the head and for the spouse, compared to being unemployed. The interaction between education and being unemployed is negative, for both the head as for the spouse, just like in the other countries. The effect of being unemployed is less strong for higher educated. When we look at Model 3a, we see that the effect of economic growth and the unemployment rate is not significant. Union density, authority and tax are positively related to household income, while bargaining coverage and centralization are negatively related.
Pagina 48
Table 11: Multilevel Regression Analyses for Household Incomes in Germany N = 20507, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.284 (.034)* -.281 (.035)* -.298 (.036) -.190 (.042)* Age head (18-30 = ref) 30 45 years .156 (.026)* .150 (.028)* .152 (.028)* .162 (.027)* 45 61 years .196 (.032)* .192 (.031)* .197 (.033)* .201 (.031)* Children (0 children = ref) 1 child .076 (.026)* .068 (.030)* .070 (.030)* .076 (.026)* 2 children -.161 (.028)* -.032 (.029)* -.035 (.030) -.035 (.028) 3 children -.037 (.047) -.002 (.049) -.006 (.050) -.337 (.047)* 4 children -.052 (.068) -.034 (.078) -.039 (.073) -.047 (.068) 5 or more children -.016 (.113) -.038 (.115) .031 (.115) .025 (.113) Education head .212 (.016)* .212 (.017)* .242 (.018)* .213 (.016)* Gender head (female = ref) Man .108 (.017)* .097 (.018)* .107 (.017)* .088 (.018)* Adults (2 adults = ref) 1 Adult -.249 (.054)* -.366 (.021)* -.401 (.131)* -.222 (.054)* 3 Adults .018 (.025)* .005 (.027) .087 (.031)* .014 (.026)* 4 Adults .087 (.034)* .076 (.037) .170 (.044)* .082 (.035)* 5 or more adults .153 (.049)* .120 (.052)* .231 (.065)* .142 (.049)* Earners (1 earner = ref) 0 earners -.955 (.044)* -.324 (.048)* -.919 (.049)* -.958 (.045)* 2 earners .392 (.016)* .374 (.017)* .356 (.018)* .400 (.016)* 3 earners .183 (.026)* .185(.028)* .182 (.028)* .185 (.026)* 4 earners .525 (.045)* .518 (.050)* .515 (.050)* .528 (.047)* 5 or more earners .993 (.101)* .955 (.107)* .947 (.107)* .987 (.101)* Age spouse (18-30 = ref) 30 45 years .134 (.024)* .145 (.025)* .140 (.025)* .139 (.024)* 45 61 years .153 (.029)* .167 (.031)* .161 (.031)* .158 (.029)* Education spouse .170 (.012)* .158 (.012)* .178 (.014)* .171 (.012)* Employment head (unemployed = ref) Employed .088 (.026)* Self-employed .078 (.030)* Employment spouse (unemployed = ref) Employed .095 (.026)* Self-employed .198 (.030)* Interaction Education head * education spouse .107 (.015)* .127 (.016)* .117 (.016)* .106 (.015)* Education Head*Unemp. (low = ref) -.158 (.035)* Education Spouse*Unemp.(low=ref) -.065 (.020)* Economic Characteristics Economic Growth -.006 (.005) Unemployment rate -.011 (.013)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .165 .159 .160 .166 = We excluded some waves due to missing values, the total number of respondents in this model are 19845
Model 3b 2.144 (.584)* .065 (.022)* .135 (.026)* -.094 (.022)* -.065(.024)* -.083 (.039)* -.056 (.058) .110 (.095) .069 (.014)* .088 (.005)* -.220 (.085)* .156(.022)* .303 (.030)* .508 (.041)* -.414 (.040)* .061 (.014)* .174 (.022)* .439 (.050)* .681 (.084)* .013 (.020) .036 (.025) .040 (.010)*
0.043 (.013)*
.023 (.016)* -.045 (.013)* 1.489 (.580)* -3.192 (.958)* -.648 (1.493) .638 (.084)* .409
France In France, we see that the effect of education is positively related with household income. We also find a positive effect of assortative mating, and men earn more than women. In Model 2b we see that being employed is positively related with household income, compared to being unemployed, but that being self-employed shows different effects for the head and spouse. We furthermore notice that economic growth and unemployment rate positively related to household income. The same accounts for union
Pagina 49
density, authority and centralization, while social security is negatively related to household income. For tax and bargaining coverage we find no significant effect.
Table 12 : Multilevel Regression Analyses for Household Incomes in France N = 30125, 5 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -1.262 (.376)* .254 (.067)* -.419 (.024) -6.215 (.703)* Age head (18-30 = ref) 30 45 years 1.392 (.259)* .127 (.048)* .240 (.013)* .225 (.010)* 45 61 years 3.023 (.320)* .255 (.061)* .347 (.016)* .310 (.012)* Children (0 children = ref) 1 child .511 (.265)* -.047 (.049)* .155 (.019)* .207 (.015)* 2 children .956 (.353)* -.158 (.063)* .003 (.015)* .032 (.012)* 3 children 1.852 (.498)* -.081 (.089)* -.069 (.020)* -.108 (.015) 4 children 2.085 (.643)* -.066 (.119)* -.071 (.029)* -.120 (.019)* 5 or more children 2.468 (.810)* .061 (.153)* -.126 (.045)* -.195 (.023)* Education head .322 (.094)* .278 (.018)* .142 (.006)* .103 (.094)* Gender head (female = ref) Man .309 (.009)* .296 (.010)* .162 (.011)* .308 (.010)* Adults (2 adults = ref) 1 Adult -.249 (.231) -.366 (.021)* -.448 (.131)* -.222 (.005)* 3 Adults -.179 (.226) -.203 (.014) .129 (.038)* .153 (.011)* 4 Adults .179 (.267) .232 (.047) .220 (.051)* .269 (.015)* 5 or more adults .109 (.180) .309 (.061)* .285 (.070)* .386 (.020)* Earners (1 earner = ref) 0 earners -3.122 (.253)* -.622 (.042)* -.985 (.021)* -.933 (.017)* 2 earners 1.961 (.334)* -.385 (.029)* -.467 (.010)* -.355 (.007)* 3 earners 2.801 (.509)* .313 (.078)* .192 (.012)* .213 (.009)* 4 earners 3.262 (.709)* .995 (.180)* .460 (.019)* .471 (.015)* 5 or more earners 4.700 (1.584)* 1.090 (.282)* .834 (.039)* .872 (.029)* Age spouse (18-30 = ref) 30 45 years .962 (.230)* .208 (.043)* .140 (.012) .129 (.009)* 45 61 years 1.975 (.308)* .261 (.059)* .203 (.015) .184 (.012)* Education spouse .167 (.089)* .232 (.017)* .227 (.006)* .176 (.004)* Employment head (unemployed = ref) Employed .157 (.009)* Self-employed -.013 (.014) Employment spouse (unemployed = ref) Employed .142 (.010)* Self-employed -.350 (.015)* Interaction Education head * education spouse .139 (.060)* .039 (.010)* .130 (.004)* .137 (.060)* Education Head*Unemp. (low = ref) .032 (.008)* Education Spouse*Unemp.(low=ref) -.034 (.009)* Economic Characteristics Economic Growth .007 (.001)* Unemployment rate .008 (.002)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .189 .290 .298 .194 = We excluded some waves due to missing values, the total number of respondents in this model are 30125 Model 3b -2.408 (.168)* .187 (.009)* .266 (.011)* -.251 (.014) -.108(.015)* -.140 (.014) -.130 (.018)* -.178 (.021)* .131 (.004)* .140 (.010)* -.220 (.005)* .182(.010)* .318 (.014)* .492 (.019)* -.647 (.016)* -.330 (.006)* .204 (.009)* .456 (.014)* .800 (.027)* .011 (.008) .164 (.011) .164 (.004)*
.097 (.003)*
.063 (.025)* -.027 (.023) .678 (.164)* .342 (.096)* -1.341 (.452)* -.016 (.011) .201
Norway In Norway, we see that education has a positive effect for the head and for the spouse, the same effect has been found for assortative mating. Furthermore, we see that men earn more than women, and that being employed is positively related with household income while we find no effect for selfemployment. The interaction between education and being unemployed is positive, for the head as for
Pagina 50
the spouse. In Model 3a, we see that economic growth and the unemployment rate are positively related with household income, while the effect of centralisation is negative. Union density, authority and tax are positively affecting household income.
Table 13: Multilevel Regression Analyses for Household Incomes in Norway N = 25683, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.504 (.172)* -.424 (.290) -.369 (.290) -.764 (.182)* Age head (18-30 = ref) 30 45 years .172 (.028)* .165 (.034)* .168 (.034)* .174 (.028)* 45 61 years .227 (.033)* .250 (.040)* .251 (.040)* .229 (.033)* Children (0 children = ref) 1 child -.172 (.023)* -.139 (.029)* -.131 (.029)* -.172 (.023)* 2 children -.273 (.049)* -.201 (.043)* -.189 (.043)* -.272 (.033)* 3 children -.332 (.064)* -.196 (.065)* -.188 (.065)* -.331(.049)* 4 children -.419 (.099)* -.281 (.082)* -.274 (.082)* -.417 (.064)* 5 or more children -.402 (.028) -.276 (.122) -.267 (.122)* -.398 (.099)* Education head .137 (.007)* .125 (.009)* .119 (.010)* .134 (.007)* Gender head (female = ref) Man .186 (.171)* .133 (.289) .117 (.289) .178 (.171)* Adults (2 adults = ref) 1 Adult -.249 (.051)* -.366 (.075)* -.401 (.074)* -.222 (.021)* 3 Adults .155 (.025)* .139 (.030) .133 (.030)* .154 (.025)* 4 Adults .296 (.034)* .259 (.043) .248 (.043)* .296 (.034)* 5 or more adults .376 (.049)* .281 (.064)* .266 (.064)* .375 (.049)* Earners (1 earner = ref) 0 earners -.380 (.081)* -.458 (.089)* -.481 (.090)* -.385 (.081)* 2 earners .113 (.024)* .102 (.028)* .133 (.029)* .114 (.024)* 3 earners .139 (.020)* .110 (.024)* .109 (.024)* .140 (.020)* 4 earners .318 (.029)* .255 (.038)* .255 (.038)* .322 (.029)* 5 or more earners .732 (.051) .484 (.075)* .481 (.074)* .740 (.051)* Age spouse (18-30 = ref) 30 45 years .126 (.024) .110 (.030)* .113 (.030) .126 (.024)* 45 61 years .149 (.030) .119 (.036)* .125 (.036) .149 (.030)* Education spouse .111 (.009)* .104 (.011)* .114 (.012)* .118 (.009)* Employment head (unemployed = ref) Employed .091 (.024)* Self-employed .048 (.031) Employment spouse (unemployed = ref) Employed .021 (.005)* Self-employed .076 (.042) Interaction Education head * education spouse .112 (.022)* .048 (.007)* .047 (.007)* .048 (.005) Education Head*Unemp. (low = ref) .103 (.033)* Education Spouse*Unemp.(low=ref) .109 (.035)* Economic Characteristics Economic Growth .051 (.015)* Unemployment rate .018 (.006)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .109 .075 .079 .110 = We excluded some waves due to missing values, the total number of respondents in this model are 18939 Model 3b -.382 (.153)* .112 (.028)* .145 (.032)* -.162 (.022)* -.258(.032)* -.315 (.048)* -.338 (.062)* -.315 (.096)* .090 (.007)* .174 (.167) -.220 (.050)* .185 (.024)* .345 (.033)* .452 (.048)* -.025 (.081) .021 (.024) .115 (.019)* .285 (.029)* .761 (.050)* .068 (.024)* .075 (.029)* .106 (.009)*
.040 (.005)*
.046 (.010)* .005 (.015) .208 (.091)* -.269 (.092)* .655 (.880) .224 (.087)* .152
Denmark In Denmark, education has a positive effect for the head and for the spouse, the same effect has been found for assortative mating. Furthermore, we see that men earn more than women, and that being employed or self-employed is positively related with household income. The interaction between
Pagina 51
education and being unemployed is negative, for the head as for the spouse. In Model 3a, we see that economic growth and the unemployment rate are positively related with household income. In Model 3b we see that authority and centralisation are positively related with household income, while social security and tax are negatively related.
Table 14: Multilevel Regression Analyses for Household Incomes in Denmark N = 105306, 5 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.221 (.010)* -.275 (.011)* -.641 (.018) -.623 (.028)* Age head (18-30 = ref) 30 45 years .225 (.011)* .234 (.011)* .228 (.011)* .226 (.010)* 45 61 years .294 (.013)* .321 (.014)* .336 (.014)* .298 (.012)* Children (0 children = ref) 1 child -.189 (.019)* -.188 (.019)* -.218 (.013)* -.190 (.013)* 2 children -.310 (.029)* -.299 (.015)* -.361 (.020)* -.311 (.019)* 3 children -.603 (.013)* -.595 (.020)* -.698 (.031)* -.608 (.030)* 4 children -.606 (.019)* -.591 (.029)* -.660 (.038)* -.606 (.037)* 5 or more children -.599 (.060)* -.577 (.046)* -.623 (.062)* -.598 (.060)* Education head .150 (.005)* .138 (.006)* .167 (.007)* .147 (.004)* Gender head (female = ref) Man .064 (.009)* .035 (.009)* .023 (.009)* .051 (.009)* Adults (2 adults = ref) 1 Adult -.249 (.131)* -.295 (.021)* -.448 (.131)* -.222 (.005)* 3 Adults .297(.011)* .276 (.014) .327 (.013)* .297 (.011)* 4 Adults .479 (.015)* .476 (.020) .539 (.020)* .482 (.013)* 5 or more adults .385 (.020)* .759 (.030)* .883 (.030)* .757 (.029)* Earners (1 earner = ref) 0 earners -.822 (.018)* -.801 (.021)* -.453 (.023)* -.813 (.017)* 2 earners .453 (.009)* .448 (.010)* .248 (.011)* -.449 (.009)* 3 earners .246 (.016)* .095 (.012)* .073 (.010)* .102 (.009)* 4 earners .471 (.015)* .242 (.019)* .198 (.07)* .246 (.016)* 5 or more earners .637 (.039)* .624 (.039)* .572 (.042)* .631 (.039)* Age spouse (18-30 = ref) 30 45 years .156 (.010)* .160 (.010)* .154 (.010)* .010 (.078) 45 61 years .194 (.012)* .202 (.012)* .199 (.013)* .012 (.093) Education spouse .116 (.005)* .165 (.006)* .175 (.007)* .139 (.005)* Employment head (unemployed = ref) Employed .281 (.010)* Self-employed .056 (.014)* Employment spouse (unemployed = ref) Employed .142 (.014)* Self-employed .020 (.006)* Interaction Education head * education spouse .065 (.004)* .059 (.005)* .041 (.005)* .061 (.003)* Education Head*Unemp. (low = ref) -.166 (.008)* Education Spouse*Unemp.(low=ref) -.075 (.009)* Economic Characteristics Economic Growth .029 (.004)* Unemployment rate .062 (.004)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .194 194 .209 .196 = We excluded some waves due to missing values, the total number of respondents in this model are 95615 Model 3b 1.513 (.603)* .218 (.011)* .291 (.013)* -.193 (.013)* -.323(.019)* -.623 (.029)* -.632 (.036)* -.590 (.059)* .134 (.005)* .046 (.009)* -.220 (.005)* .307 (.012)* .503 (.019)* .795 (.028)* -.708 (.016)* -.403 (.006)* .102 (.009)* .245 (.015)* .625 (.039)* .150 (.010)* .189 (.012)* .137 (.005)*
.062 (.003)*
-.015 (.009) -.018 (.023) .931 (.364)* .385 (.132)* -2.476 (.463)* -.817 (.019)* .220
Finland Education has a positive effect for the head and for the spouse in Finland, the same effect has been found for assortative mating. Furthermore, we see that men earn more than women, and that being employed or self-employed is positively related with household income. The interaction between
Pagina 52
education and being unemployed is negative, for the head as for the spouse, but the effect for the head is not significant. In Model 3a, we see that economic growth has no effect and that the unemployment rate is positively related with household income. In Model 3b we see that unions density and centralisation are affecting household income positively, while authority, social security and tax are negatively contributing to household income.
Table 15: Multilevel Regression Analyses for Household Incomes in Finland N = 31880, 5 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.578 (.022)* -.448 (.028)* -.294 (.032) -.714 (.028)* Age head (18-30 = ref) 30 45 years .201 (.023)* .163(.032)* .146 (.032)* .206 (.023)* 45 61 years .344 (.025)* .293 (.036)* .270 (.036)* .349 (.025)* Children (0 children = ref) 1 child -.120 (.265)* -.072 (.030)* -.071 (.030)* -.128 (.020)* 2 children -.161 (.353)* -.106 (.044)* -.097 (.044)* -.174 (.029)* 3 children -.189 (.498)* -.145 (.066)* -.129 (.067)* -.208 (.044)* 4 children -.222 (.643)* -.166 (.078)* -.156 (.078)* -.242 (.053)* 5 or more children -.205 (.810)* -.149 (.088)* -.149 (.088)* -.224 (.063)* Education head .197 (.006)* .142 (.009)* .149 (.009)* .192 (.006)* Gender head (female = ref) Man .183 (.017)* .175 (.019)* .104 (.021)* .167 (.017)* Adults (2 adults = ref) 1 Adult -.249 (.054)* -.366 (.021)* -.401 (.131)* -.222 (.054)* 3 Adults .132 (.021)* .096 (.030) .087 (.031)* .141 (.021)* 4 Adults .232 (.029)* .189 (.044) .170 (.044)* .243 (.029)* 5 or more adults .270 (.042)* .258 (.064)* .231 (.065)* .285 (.042)* Earners (1 earner = ref) 0 earners -.409 (.044)* -.324 (.056)* -.401 (.059)* -.414 (.044)* 2 earners .269 (.017)* .234 (.023)* .269 (.025)* .267 (.017)* 3 earners .180 (.016)* .085(.024)* .088 (.024)* .181 (.016)* 4 earners .311 (.027)* .114 (.041)* .125 (.041)* .318 (.027)* 5 or more earners .379 (.054)* .194 (.082)* .209 (.082)* .391 (.054)* Age spouse (18-30 = ref) 30 45 years .151 (.020)* .087 (.029)* .105 (.029)* .152 (.020)* 45 61 years .204 (.023)* .162 (.032)* .193 (.032)* .204 (.023)* Education spouse .183 (.017)* .097 (.009)* .131 (.010)* .133 (.006)* Employment head (unemployed = ref) Employed .088 (.026)* Self-employed .078 (.030)* Employment spouse (unemployed = ref) Employed .095 (.026)* Self-employed .198 (.030)* Interaction Education head * education spouse .117 (.005)* .098 (.008)* .091 (.008)* .117 (.005)* Education Head*Unemp. (low = ref) -.002 (.039)* Education Spouse*Unemp.(low=ref) -.115 (.023)* Economic Characteristics Economic Growth -.002 (.002) Unemployment rate .015 (.002)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .190 .100 .107 .192 = We excluded some waves due to missing values, the total number of respondents in this model are 18088 Model 3b -4.069 (.336)* .207 (.023)* .354 (.025)* -.124 (.020)* -.165(.029)* -.191 (.044)* -.221 (.053)* -.204 (.063)* .191 (.006)* .115 (.019)* -.220 (.005)* .136(.021)* .234 (.029)* .272 (.042)* -.414 (.044)* .267 (.017)* .177 (.016)* .315 (.027)* .389 (.054)* .153 (.020)* .210 (.023)* .140 (.006)*
0.113 (.005)*
.058 (.005)* -.027 (.023) -2.182 (.266)* 1.771 (.242)* -4.534 (.493)* -.010 (.004)* .194
Sweden The multilevel regression analysis for Sweden shows us that education has a positive effect for the head and for the spouse in Sweden, and that the same effect has been found for assortative mating. We
Pagina 53
see that men earn more than women, and that being employed or self-employed is positively related with household income, both for the head as for the spouse. The interaction between education and being unemployed is negative, for the head as for the spouse. We furthermore notice that economic growth is negatively related to household income, while unemployment rate is positively related. Union density and tax are positively contributing to a higher income, while bargaining coverage, authority and centralisation are negatively related to household income.
Table 16: Multilevel Regression Analyses for Household Incomes in Sweden N = 25837, 6 waves Model 1 Model 2a Model 2b Model 3a Individual Characteristics Constant -.343 (.022)* -.259 (.027)* -.255 (.027)* -.698 (.032)* Age head (18-30 = ref) 30 45 years .175 (.021)* .100 (.028)* .092 (.028)* .184 (.021)* 45 61 years .286 (.024)* .163 (.031)* .154 (.031)* .297 (.023)* Children (0 children = ref) 1 child .170 (.026)* -.062 (.028)* -.067 (.028)* .030 (.026) 2 children .360 (.039)* -.046 (.042) -.054 (.042) .109 (.039)* 3 children .555 (.060)* -.046 (.065) -.056 (.065) .174 (.060)* 4 children .543 (.069)* -.062 (.081) -.072 (.081) .158 (.068)* 5 or more children .587 (.095)* -.041 (.126)* -.060 (.126) .211 (.094)* Education head .192 (.008)* .040 (.017)* .053 (.018)* .184 (.021)* Gender head (female = ref) Man .275 (.017)* .081 (.017)* .080 (.017)* .093 (.017)* Adults (2 adults = ref) 1 Adult -.145 (.094)* -.366 (.021)* -.401 (.092)* -.222 (.092)* 3 Adults .309 (.027)* .064 (.028)* .067 (.028)* .012 (.026) 4 Adults .505 (.038)* .107 (.041)* .111 (.041)* .054 (.038) 5 or more adults .802 (.059)* .107 (.062)* .116 (.063)* .118 (.059)* Earners (1 earner = ref) 0 earners -.688 (.042)* -.251 (.023)* -.221 (.054)* -.609 (.041)* 2 earners .333 (.018)* .041 (.024)* .016 (.024)* -.269 (.018)* 3 earners .084 (.019)* .160 (.040)* .057 (.024)* .086 (.019)* 4 earners .148 (.037)* .233 (.092)* .129 (.040)* .139 (.036)* 5 or more earners .293 (.094) .296 (.028)* .189 (.092)* .238 (.092)* Age spouse (18-30 = ref) 30 45 years .118 (.018)* .049 (.025)* .046 (.025) .105 (.018)* 45 61 years .162 (.022)* .085 (.027)* .080 (.027)* .156 (.021)* Education spouse .056 (.007)* .041 (.014)* .057 (.015)* .104 (.008)* Employment head (unemployed = ref) Employed .711 (.054)* Self-employed .301 (.125) Employment spouse (unemployed = ref) Employed .271 (.021)* Self-employed .332 (.123)* Interaction Education head * education spouse .074 (.006)* .086 (.015)* .077 (.015)* .050 (.006) Education Head*Unemp. (low = ref) -.100 (.040)* Education Spouse*Unemp.(low=ref) -.047 (.018)* Economic Characteristics Economic Growth -.056 (.003)* Unemployment rate .067 (.003)* Political Charateristics Union Density Bargaining Coverage Authority Centralisation Social Security Tax Rsquare .116 .046 .047 .155 = We excluded some waves due to missing values, the total number of respondents in this model are 12830 Model 3b .034 (.135) .165 (.020)* .268 (.023)* .007 (.026) .051 (.038) .095 (.059) .092 (.067) .183 (.092) .175 (.007)* .042 (.017)* -.220 (.085)* .023 (.022) .019 (.037) .004 (.057) -.502 (.041)* .245 (.018)* .085 (.018)* .124 (.036)* .221 (.090)* .101 (.018)* .139 (.021)* .116 (.008)*
.038 (.006)*
.043 (.004)* -.044 (.012)* -1.672 (.580)* -1.101 (.398)* -.045 (.880) .255 (.083)* .193
Pagina 54
When we look at the results for education in the eleven countries in Table 17, we see that education is positively related to household income, and that the strongest effect is seen in France. The weakest effects are found in the Scandinavian countries, where the effect is even lower than .200. We furthermore notice that the effect of education is also positive and significant for the spouse in every country, except for France, as we can see in Table 18. We see that the effect of education is the strongest in France, while we find no effect for the spouse. In the rest of the countries we see that education is positively related to household income.
Table 17: Results for Education of the head in every country per group Country Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada .206 (.025)* .212 (.016)* .322 (.094)* .178 (.004)* .197 (.006)* .150 (.005)* .137 (.007)* .192 (.008)* .175 (.001)* .242 (.003)* .280 (008)*
Education Head
Table 18: Results for Education for the spouse in every country per group Country Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada
Education Spouse
.080 (.009)* .197 (.004)* .090 (.006)*
.183 (.017)* .116 (.005)* .111 (.009)* .056 (.007)*
.245 (.027)* .170 (.012)* .167 (.089) .171 (.004)*
Pagina 55
Because we were also interested in the effects of assortative mating, we also computed an interaction between the two education characteristics, which appears to be positively related in all the eleven countries, also in France, where we see the strongest effect for assortative mating. This is remarkable, because we found no effect for education for the spouse in France. The other countries show a positive relation between assortative mating and the household income.
Table 19: Results for assortative mating in every country per group Country Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada .122 (.022)* .107 (.015)* .139 (.006)* .094 (.003)* .117 (.005)* .065 (.004)* .112 (.022)* .074 (.006)* .013 (.001)* .130 (.003)* .022 (.002)* Assortative Mating
Men still earn more than women, in every country that we selected. We find a strong effect in Australia, Sweden, France, and Canada. The effects for other countries are positive and significant, which shows that men are still earning a higher income than women.
Table 20: Results for Gender in every country per group Country Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada .156 (.060)* .108 (.017)* .309 (.009)* .311 (.007)* .183 (.017)* .064 (.009)* .186 (.171)* .275 (.008)* .266 (.110)* .130 (.003)* .114 (.016)* Man (women is ref.)
Pagina 56
To explore the effects of employment status for the head and the spouse, we examined what the difference is when we compare it to being unemployed. We notice that the effects are different for the self-employed, who earn a higher income in the United States, Finland, Denmark, the Netherlands and Germany, while there is a negative or no effect in the other countries. What is remarkable is that we find a negative effect in the Anglo-Saxon countries, except in the United States. We find that being employed leads to a higher household income in every country. The strongest effect is found for Sweden and the Netherlands.
Table 21: Results for Employment Status head (unemployed is ref.) in every country per group Country Employed Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada .823 (.047)* .088 (.026)* .157 (.009)* .123 (.009)* .229 (.128)* .078 (.030)* -.013 (.014) -.017 (.011) .088 (.026)* .281 (.010)* .091 (.024)* .711 (.054)* .078 (.030)* .056 (.014)* .048 (.031) .301 (.125) .290 (.043)* .051 (.013)* .265 (.024)* -.048 (.048) .130 (.017)* -.045 (.015)* Self-employed
Pagina 57
We have found the same findings for the employment status, where being employed for the spouse is significantly related with household income in every country, compared to being unemployed, selfemployed shows some different results. We find a positive effect of being self-employed for the spouse for household income in the United Kingdom, Finland, Denmark, Sweden, and Germany, but we also find a strong negative effect for Canada and a minor negative effect for France.
Table 22: Results for Employment Status spouse (unemployed is ref.) in every country per group Country Employed Anglo-Saxon Countries Australia United States United Kingdom Scandinavian Countries Finland Denmark Norway Sweden Other Western Countries Netherlands Germany France Canada .323 (.047)* .095 (.026)* .142 (.009)* .142 (.010)* .653 (.154)* .198 (.030)* -.123 (.027)* -.350 (.015)* .095 (.026)* .142 (.014)* .021 (.005)* .271 (.021)* .198 (.030)* .020 (.006)* .076 (.042) .332 (.123)* .234 (.058)* .055 (.018)* .106 (.024)* .093 (.066) .009 (.022) .045 (.016)* Self-employed
Pagina 58
6. Discussion
In this article, we wanted to find a solution for the puzzle of income inequality. The metaphor of the Gordian Knot led to a journey whereby we tried to find explanations for the increased income inequality over the last three decades. We tried to find an answer for this problem by integrating sociological, political, and economic indicators that have been related with income inequality by other scholars. This eclectic way of scientific research led to exhaustive evidence for causal relations between macro and micro developments that can explain the increased income inequality. We will discuss the most important findings in this section. Three central questions were formulated for this paper. First of all, we wanted to find an answer on the question how the income inequality has developed over time in the United States, United Kingdom, Australia, Sweden, Norway, Denmark, Finland, The Netherlands, France, Canada, and Germany. Other scholars have found that the income inequality increased in most countries, especially in the Anglo-Saxon countries, while the Scandinavian countries did not evolve into more unequal societies. To examine whether these trends have occurred, we used the Gini-coefficient as our indicator for income inequality and the income distribution of the top incomes. We noticed that the Anglo-Saxon countries (Australia, United States, United Kingdom) first show a decline in income inequality between 1940 and 1960, but in the 1980s we see a rapid increase of income inequality in these countries. Remarkable is that the United States had a Gini coefficient in 2007 of 47, which is the highest ever reported. If we compare this trend with the Scandinavian countries, we notice that these countries started with a high income inequality after the second war, but evolved into more egalitarian countries over the years, whereby they have a Gini-coefficient that is the lowest in Europe, except for Denmark. The Gini-coefficient for the other Western countries showed a quite similar pattern, whereby France and the Netherlands started with a high income inequality which evolved to a more equal income distribution. This ended in the 1980s, where we see a minor increase of the income inequality, but not as strong as in the Anglo-Saxon countries. The distribution of the top incomes have been studies by many sociological scholars, whereby they made a distinction between the top 0,1 %, 1 %, 5 % and 10 % of the income distribution. If we compare the distribution of these top incomes between the different countries over the years, we notice that the strongest increases are reported in the United States and the United Kingdom. The other Western countries and the Scandinavian countries show the same developments. In every country we see a similar sort pattern, whereby the rich people become richer, while the poor people stay poor. The bottom decile has lost ground in Germany and Sweden, and more substantially so in the Netherlands, the United Kingdom, and the Unites States. These developments have occurred starting from the 1980s, and still are evolving towards more inequality. These findings support our hypotheses about the income inequality and match earlier findings. The next question that we wanted to examine was which macro explanations can be found for
Pagina 59
these different trends and how we can explain the increased income inequality. We tested political, sociological, and economic factors, which may contribute to the income inequality in these eleven countries. Economic hypotheses that we stated were threefold. The first hypothesis stated that economic growth would lead to less income inequality, while the second hypothesis stated that the economic growth is positively related to income inequality. The different ways of looking at economic growth is related by the distribution of the increased wealth. If everyone profits from the economic growth equally, the income inequality will decline. If this is not the case, and a small group of people profit more from the economic growth, consequently the income inequality will increase. We also expected that the unemployment rate would affect the income inequality positively. The multivariate regression analyses for the Anglo-Saxon countries showed that economic growth had no effect on the income inequality in Australia, United Stated and the United Kingdom, while the unemployment rate only affects the Gini in the first Model for every country whereby we only tested the economic variables. After adding other variables the significance disappears. For the other Western countries, we saw that unemployment negatively influences the Gini-coefficient, while economic growth had no effect. Economic growth had no effect on the Gini in the Scandinavian countries, while unemployment had a negative effect on the Gini, but this effect disappeared when we added sociological and political factors. We see that the effect of economic growth and unemployment are not found in this paper, which is in contrast with our first three hypotheses. The political explanations for the income inequality that are described by many scholars are summarized in our hypotheses about the neo-liberalization of the politics. Our hypothesis stated that countries that have implemented a higher degree of neoliberal policy changes have a higher income inequality than countries that have a lower degree of neoliberal policy changes. Our results corroborated this hypothesis for the Anglo-Saxon countries, whereby we see that authority of unions, coordination of wage bargaining, the dominant level of wage bargaining and the minimum wage settings are important factors for explaining the income inequality. The explanation power of these variables is very high, which shows that our hypothesis of neoliberal policy changes have influenced the income inequality in Australia, the United States and the United Kingdom. We saw that higher levels of coordination of wage bargaining, with fragmented bargaining as reference category, affect the Gini-coefficient positively. Furthermore, when the dominant level of wage bargaining is sectoral/industry level, or national/central level, the smaller the Gini-coefficient will be. The level of minimum wage setting also influences the Gini-coefficient, whereby a minimum wage setting by collective agreement or tripartite wage boards in sectors, national minimum wage set by fixed rule, and national minimum wage set by the government, show a positive effect on the Gini-coefficient, compared to no minimum wage setting. The multivariate regression analysis for the other Western countries shows that coordination of wage bargaining, governmental intervention in wage bargaining and the level of wage bargaining affect the income inequality. Minimum wage setting also influences the income inequality, whereby the higher the level of wage setting, the smaller the Gini-coefficient. In the Scandinavian countries, we
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see that bargaining coverage and authority of unions negatively affect the Gini, while the coordination of wage bargaining positively influences the income inequality. The higher the level of wage bargaining, the smaller the Gini-coefficient. Remarkable about these findings is that we roughly find the same results for the Scandinavian and other Western countries, in contrast to the findings for the Anglo-Saxon countries. We notice that the minimum wage setting is positively related with the Ginicoefficient in the Anglo-Saxon countries, while it is negatively related in the other countries. This confirms our hypothesis that neo-liberalization of politics have influenced the Gini-coefficient, although we have found different results for the countries that we have studies. Sociological explanation for the increased income inequality can be found in the influence of labour participation of women. According to the literature, more and more woman are going to work, and this will lead to a decline of the income inequality. The results show that this is not found for the Anglo-Saxon countries, but has been found for the Scandinavian and other Western countries. We therefore corroborate our hypothesis concerning female labour participation. The last questions considered the micro explanations to explain the household incomes in the eleven different countries. Literature assumes that education has a major influence on the household income in Scandinavian countries, other Western countries, and the Anglo-Saxon countries. The same effects were expected for the social expenditure, taxation, and changing demographics. Because we were interested in disentangling the Gordian Knot, we tested these hypotheses in the eleven different countries separately. We want to find an answer to our question of who gets what and why. The results showed that education is an important factor for explaining the household income, both for the head of the household as for the spouse. In every model we find that education positively affects the household income, in every country. This confirms our hypotheses about the effects of education, whereby we assumed that merits lead to a higher income, both for the head as for the spouse. We also found that assortative mating, whereby higher educated marry higher educated, and vice versa, leads to a higher household income. People who have a higher education, have also a higher income, as we have seen. When people mate with other people who have also a high education, their income will accumulate. In contrast, people with lower education mate with lower educated, who both have also a lower income. Where many scholars have described that people are marrying with people with the same educational level instead of mixed marriages, this will increase the income inequality due to the important influence of education. This confirms our hypothesis about assortative mating. Man still earn more money than women, in every country. Being employed leads to a higher income than being unemployed, but being self-employed does not automatically lead to a higher income in every country. Especially in the Anglo-Saxon countries we find no effect of self-employment (compared to being unemployed), in the United Kingdom even a negative effect. If we look at the interaction between education and being unemployed (reference category is low educated), we found a negative effect for the head of the household in the United States, the United Kingdom, Australia, Germany, Denmark, Finland, and Sweden. This means that the effect for higher educated is not that strong as for lower
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educated, as we expected in our hypothesis. We found a positive effect for the head of the household in Canada, the Netherlands, France, and Norway. The interaction between unemployment and education are differently related in the eleven different countries. We found that the interaction effect of education and unemployment for the spouse is negatively related in the United States, Australia, the United Kingdom, Canada, Germany, France, Denmark, Finland, and Sweden. This is consistent with our hypothesis. In contrast, the interaction effect between education and being unemployed is positive in the Netherlands and Norway. The macro factors that proved to be significant contributors to the income inequality in our first analyses were added to our household characteristics. The results showed that these macro indicators contribute to the explanation power of our Models and that some effects appeared to be significant contributors to household income. We noticed that the effect of economic growth is negative and significant in the United States, Australia, the United Kingdom, the Netherlands and Sweden, while it was positive in Canada, France, Norway and Denmark. Social security was added to test whether this had an effect on the household income. We found negative effects for social expenditure in Canada, France, Denmark and Finland. In contrast, in Australia we found a positive effect of social expenditure. The average amount of tax that has been collected effects the household negatively in the United States, the United Kingdom, Denmark, and Finland, and positively in the Netherlands, Norway, Germany, and Sweden. These findings show us that our hypotheses regarding social expenditure and taxation are different between the countries. Our hypothesis was that tax collection is negatively related to household income, while in fact we find for only four countries this effect, and for four we find a positive effect. For three countries we found no effect. We therefore conclude to reject this hypothesis. Our hypothesis about social expenditure assumed that social expenditure has a positive effect on household incomes, which we only have found in Australia. This hypothesis is therefore rejected as well.
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7. Conclusion
The Gordian Knot that we tried to disentangle, is still a knot, but we have loosened the grip. We examined which factors contributed to the increased inequality in some countries, while other countries did evolve into more egalitarian countries. The results provided us with a clear explanation of how the Gini-coefficient can be related to economic, political, and sociological aspects. The explanation power of these models were above the 90 %, so that we can assume that these factors are the main predictors of income inequality (Weeks, 2005). Besides this, we also examined which factors are related to income at the household level. This has provided us with a better insight in the income inequality in the United States, the United Kindom, Australia, Sweden, Denmark, Finland, Norway, France, Germany, the Netherlands and Canada. Studying trends in income inequality was like watching the grass grow. This was what Myles and Meyers (2007) said about the scientific research that was conducted concerning income inequality in the 1980s and 1990s. During these years, there was hardly any research conducted regarding this topic. Nowadays, the income inequality has increased in many countries, and still is increasing rapidly, especially in Anglo-Saxon countries. These facts make it more important to examine how this increased gap between the rich and the poor has occurred, because the consequences of increased inequality are enormous (Wilkinson & Pickett, 2010). The questions that we tried to answer in this paper were valid and important questions, especially to get a clearer view of the income developments over the post-war period. Who gets what and why? is an important question in sociology, and we answered these questions to a large extent by examining macro developments that explained a large part of the Gini-coefficient and the household characteristics that explained the household income. The different developments that we examined, whereby we made a distinction between sociological, economic, and political characteristics, were important developments that explained the evolution of the Gini coefficient. The integration of these three disciplines was a main objective of this paper, whereby we assumed that every discipline teaches us something about the development of the income inequality in the selected countries. The results show that this distinction was worth trying and gave us insight in the causalities of income inequality, because the macro indicators appeared to be significant contributors to our models, especially the political developments. By examining the different disciplines, we also learned more about political developments. These can and should be used by politicians to tackle the problems of income inequality. By putting more attention to the power of unions and the distribution of wages, income inequality can be reduced, which will as a consequence lead to less societal problems. Especially in times of retrenchments, we need to be careful of the consequences. Limitations of this study were that we used only 6 to 7 waves per country, to examine the household incomes in the eleven countries that we selected. If we had more waves, we would have more variations on the country level. We also noticed that is was very difficult to examine the
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countries separately, whereby every country had its own separate scale for many variables, for example education. Furthermore, the operationalization of some variables could have been constructed otherwise, like social expenditure and taxation. No we have used the average social expenditure and taxation as context effects, but this not tell us anything about the difference between household incomes. The variance in countries could reflect some of the variation in household incomes. We choose for this option because if we computed these variables in a different way, we would have used to much dummy variables which would lead other problems. Another limitation was that we did not compare different years and different countries to examine whether these differences can explain the variation in Gini-coefficient between the different years and countries. Now we have learned which factors are related with the Gini-coefficient and with the household income, we know which factors should be compared between the countries and the years to examine how and why the income inequality developed like it did. Another approach is global inequality; an approach that takes into account both within- and between country income inequalities. More importantly, if we know more about the why and how of income inequality, we could transform these findings into policy advise, there we have seen that a large difference between rich and poor leads to many societal problems (Wilkinson & Pickett, 2010). The future hopefully will show us that after an increase of income inequality, a trend of levelling will occur (Solimano, 2008). Milanovic (2000) shows that greater inequality is associated with a growing tendency towards intervention to less inequality, because of the greater redistribution that is sought by the median voter when income distribution is less equal. The results in this article prove that countries with greater inequality of factor income eventually will redistribute more to the poor. Moene & Wallerstein (2001) show that increased inequality in pretax earnings leads to greater political demand for redistributive policies. The logic is simple and compelling. If the majority of the electorate receives a below-average income and if an increase in inequality causes above-average incomes to rise and below-average incomes to fall, then it is reasonable to think that demands for public policies to reduce the gap between rich and poor will increase. Follow up questions should address the negative (and possible positive) consequences of an increasing income inequality, trying to find evidence for the causal relations that have been described by Wilkinson and Pickett (2010). Other important questions like the global income inequality are important, but also the examination of tackling the income inequality should be of great importance.
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8. Bibliography
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Frans Folkvorddisentangling The Gordian Knot of Income Inequality

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Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

The Gordian Knot

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

2. Rising Inequality 2.1 The Gini-index

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

2.2 Top Incomes

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

3. Theory and Hypotheses

Disentangling The Gordian Knot of Income Inequality

3.1 Economic Explanations

3.1.1 Economic Growth

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

3.2 Political Explanations

Disentangling The Gordian Knot of Income Inequality

followed the free market principle in a lesser extent.

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

3.2.2 Social Expenditure

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

3.3 Sociological Explanations 3.3.1 Merits

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

3.3.2 Changing Demographics

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

4. Data and Measurement

4.1 Dependent Variable

4.2 Independent Variables

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

4.2.4.1 Dependent Variable

Disentangling The Gordian Knot of Income Inequality

4.2.4.2 Independent Variables

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality

Disentangling The Gordian Knot of Income Inequality