Secular Equalization and Cyclical Behavior of Income Distribution
CLASSIC studies by Kuznets have found that in more developed countries the size distribution of income among persons and among families has become less unequal during the twentieth century [15, 16]. The significance and magniture of this secular equalization of personal incomes can be estimated from time series only when cyclical behavior of the distribution of income is statistically separated from secular trend.' A purpose of this investigation is to propose an aggregate model that incorporates cyclical factors that are hypothesized to displace the distribution of income from its secular or equilibrium trend. Annual personal income data for the Netherlands are used to estimate the model and test the hypotheses implicit in it. The following conclusions emerge: (1) income inequality has decreased markedly in the Netherlands during the last fifty years; (2) secular equalization of incomes stems from the inseparable effects of the increased labor share of income and its more equal distribution; (3) the secular trend is stronger when variation in income associated with age and sex characteristics of the population are eliminated; (4) aggregate disequilibrium in factor markets that induce cyclical change in price and employment levels appears to account for much of the behavior of income inequality; (5) the distributional effect of changes in the price level has reversed and the effect of change in labor productivity has increased in the period since the Second World War.
- DOI
- 10.2307/1926201
- Volume
- 50 (2)
- Pages
- 259
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