Extreme incomes and the estimation of poverty and inequality indicators from EU-SILC

Micro-data estimates of welfare indices are known to be sensitive to observations from the tails of the income distribution. It is therefore customary to make adjustments to extreme data before estimating inequality and poverty statistics. This paper systematically evaluates the impact of such adjustments on indicators estimated from the EU-SILC (Community Statistics on Income and Living conditions) which is expected to become the reference source for comparative statistics on income distribution and social exclusion in the EU. Emphasis is put on the robustness of cross-country comparisons to alternative adjustments. Results from a sensitivity analysis considering both simple, classical adjustments and a more sophisticated approach based on modelling parametrically the tails of the income distribution are reported. Reassuringly, ordinal comparisons of countries are found to be robust to variants of data adjustment procedures. However, data adjustments are far from innocuous. Cardinal comparisons of countries reveal sensitive to the treatment of extreme incomes, even for seemingly small adjustments.social indicators ; poverty and inequality ; extreme incomes ; parametric tail ; EU-SILC

On the magnitude of income mobility in Germany

This paper documents the magnitude of income mobility in Germany and its distribution across different income positions, using data from the German Socio-Economic Panel. The suggested graphical approach makes it straightforward to identify the portions of the distribution that have the largest impact on aggregate indices a la Fields and Ok, and hence offers a starting point to help account for income mobility levels. It appears that most of the contribution to mobility is made by the poorest 10% of the initial distribution. Average relative income changes are much lower and generally constant for the rest of the population.Income mobility ; Non-parametric regression

What Lies Behind Income Mobility? Reranking and Distributional Change in Belgium, Western Germany and the USA

The paper presents a decomposition of income mobility indices into two basic sources: Mobility induced by a change of the income distribution shape and mobility induced by a re-ordering of individuals in the income pecking order. The decomposition procedure based on counterfactual distributions results in a decomposition that is applicable to a broad class of mobility measures. Application to income indices with data for Belgium, Western Germany and the USA indicates that reranking has been the major force behind income mobility.Income mobility ; Distributional change ; Exchange and Structural mobility

Comparisons of income mobility profiles

Methods are developed for income mobility comparisons between countries or between population subgroups based on the construction of mobility profiles. Mobility profiles provide an evocative picture of both the magnitude of income changes in a population, and its distribution across the income range. Comparisons of mobility profiles permit assessments in which mobility among the poor is given greater weight than mobility among the rich. Non-intersection of mobility profiles is shown to correspond with unambiguous rankings according to a large class of functions for the social evaluation of mobility. Particular focus is put on generalized Gini social evaluation functions from which summary indices are derived to obtain complete orderings. An empirical application based on the European Community Household Panel survey illustrates the usefulness of the methods and show how they can be used to shed new light on `pro-poor growth' issues.income mobility ; pro-poor growth ; dominance

Income Inequality and Self-Rated Health Status: Evidence from the European Community Household Panel

We examine the effect of income inequality on individual self-rated health status in a pooled sample of 10 member states of the European Union using longitudinal data from the European Community Household Panel (ECHP) survey. Taking advantage of the longitudinal and cross-national nature of our data, and carefully modelling the self-reported health information, we avoid several of the pitfalls suffered by earlier studies on this topic. We calculate income inequality indices measured at two standard levels of geography (NUTS-0 and NUTS-1) and find consistent evidence that income inequality is negatively related to self-rate health status in the European Union for both men and women. However, despite its statistical significance, the magnitude of the impact on inequality on health is small.self-rated health; income inequality; European Union; panel data

Income inequality and self-rated health status: Evidence from the European Community Household Panel

We examine the effect of income inequality on individual self-rated health status in a pooled sample of 10 member states of the European Union using longitudinal data from the European Community Household Panel (ECHP) survey. Taking advantage of the longitudinal and cross-national nature of our data, and carefully modelling the self-reported health information, we avoid several of the pitfalls suffered by earlier studies on this topic. We calculate income inequality indices measured at two standard levels of geography (NUTS-0 and NUTS-1) and find consistent evidence that income inequality is negatively related to self-rated health status in the European Union for both men and women. However, despite its statistical significance, the magnitude of the impact of inequality on health is small.Self-rated health ; Income inequality ; European Union ; Panel data

Body size and wages in Europe: A semi-parametric analysis

Evidence of the association between wages and body size ?typically measured by the body mass index? appears to be sensitive to estimation methods and samples, and varies across gender and ethnic groups. One factor that may contribute to this sensitivity is the non-linearity of the relationship. This paper analyzes data from the European Community Household Panel survey and uses semi-parametric techniques to avoid functional form assumptions and assess the relevance of standard models. If a linear model for women and a quadratic model for men fit the data relatively well, they are not entirely satisfactory and are statistically rejected in favour of semiparametric models which identify patterns that none of the parametric specifications capture. Furthermore, when we use height and weight in the models directly, rather than equating body size with the body mass index, the semi-parametric models reveal a more complex picture with height having additional effects on wages. We interpret our results as consistent with the existence of a wage premium for physical attractiveness rather than a penalty for unhealthy weight.Body Mass Index; Obesity; Wages; Partial linear models; ECHP

Accounting for income distribution trends: A density function decomposition approach

This paper develops methods for decomposing changes in the income distribution using subgroup decompositions of the income density function. Overall changes are related to changes in subgroup shares and changes in subgroup densities, where the latter are broken down further using elementary transformations of individual incomes. These density decompositions are analogous to the widely-used decompositions of inequality indices by population subgroup, except that they summarize multiple features of the income distribution (using graphs), rather than focusing on a specific feature such as dispersion, and are not dependent on the choice of a specific summary index. Nonetheless, since inequality and poverty indices can be expressed as PDF functionals, our density-based methods can also be used to provide numerical decompositions of these. An application of the methods reveals the multi-faceted nature of UK income distribution trends during the 1980s.Income distribution ; Inequality ; density functions ; subgroup decomposition