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TitleInequality in Living Standards since 1980: Income Tells Only a Small Part of the Story
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Table of Contents
                            Contents
Illustration List
Foreword
Introduction
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Conclusion
Appendix 1
Appendix 2
Notes
References
About the Authors
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Document Text Contents
Page 1

Inequality
in Living
Standards
since 1980

Inequality
in Living
Standards
since 1980

Income Tells Only a Small Part of the Story

Orazio P. Attanasio
Erich Battistin
Mario Padula

Page 2

Inequality in
Living Standards since 1980

Page 63

differences in the sample size of the two surveys. However, both CEX and
CPS figures show increasing inequality for all four cohorts; the correlation
between the two series ranges from 0.69 for the youngest cohort to 0.81 for
the second youngest. Finally, in figure 3-14, we plot the coefficient of
variation for the four education groups. Again, the CEX data are noisier,
but, consistent with the CPS data, show increasing inequality for all
education groups. The increase in inequality, as measured by both the
CEX and the CPS data, is most pronounced for high school dropouts.
This contrasts with what happens with wages, where we see a sharper
increase in inequality among college graduates that is possibly due to

FIGURE 3-14
COEFFICIENT OF VARIATION OF LOG FAMILY EARNINGS:

CEX AND CPS BY EDUCATION

CEX CPS

.6

.8

1988 1994 2000

.4

High School Dropout

Some College College Graduate

1982

.6

.8

.4

1988 1994 20001982
Year

SOURCES: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey and U.S. Census Bureau, Current
Population Survey.

High School Graduate

RECENT TRENDS ON WAGES 47

Page 64

48 INEQUALITY IN LIVING STANDARDS SINCE 1980

differences in labor supply behavior between the two education groups,
as well as to differences in the synchronization of wage shocks within the
household. While the focus on full-time employees should minimize the
impact of different supply behavior at least along the extensive margin,
one cannot rule out that the education-related differences in female labor
participation are behind these results.

In order to understand to what extent individuals with different earning
abilities and labor supply behaviors are grouped within the same household,
we investigate the degree of association between earnings within the house-
hold in the rest of this chapter. This is done by computing the covariance
between the salaries within the two-earner households. In both the CEX
and the CPS, households with more than two breadwinners make up 1.5
percent of the sample. Including those households does not affect the
inequality dynamics, but increases the level of overall inequality.

Var. for the 1st earner Var. for the 2nd earner

2*Cov. between the 1st and 2nd

FIGURE 3-15
INEQUALITY TRENDS WITHIN THE HOUSEHOLD

SOURCE: U.S. Census Bureau, Current Population Survey.

.04

.10

.12

.02

.08

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Year

.06

.01

.02

.03

.04

.05

.06

Page 126

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