Low inequality with low redistribution? An analysis of income distribution in Japan, South Korea and Taiwan compared to Britain

Abstract

This article is a comparative analysis of the sources of income inequality in four countries, namely Japan, South Korea, Taiwan and the United Kingdom. It relies upon decompositions of inequality measures by population groups and income sources (except for Japan because of data limitations). According to national family income and expenditure surveys, income inequality in the three Asian countries is about average among industrialised countries, and less severe than in Britain. The factors influencing income inequality are very different between the three Asian countries on the one hand, and Britain on the other. While they do not differ very much in terms of inequality of earnings, the most equalising factor in the former countries is the favourable distribution of work across households, compared to social security in the latter. Public transfers are still very underdeveloped in Korea and Taiwan, although recent legislation will dramatically change that in the coming decades, while the Japanese social security system does not generate much vertical redistribution. However, income redistribution takes place within the family cell between people with and without work. Compared to the British situation, there are very few workless households in the three Asian countries, thanks to their different co-residence and labour participation patterns