Does Household Worklessness Explain Ireland’s High Working-Age Market Income Inequality?

  • Brian Nolan Institute for New Economic Thinking and Nuffield College, University of Oxford
  • Bertrand Maître The Economic and Social Research Institute

Abstract

Ireland has a particularly high level of inequality in incomes from the market, before
redistribution by transfers and direct taxes, and also a very high level of household joblessness. How
much does the latter serve to explain the former? We assess this by comparing Ireland in depth with
five comparator countries: France, Germany, Spain, Sweden and the UK. Decomposition of the Gini
coefficient by income source shows the dominant role played by income from labour in market income
inequality in all these countries. Decomposition of Generalised Entropy measures and counterfactual
shift-share exercises based on them show that Ireland’s high proportion of working-age households with
no earner is indeed an important contributor to its ranking in terms of market income inequality.
However, relatively high levels of dispersion in earnings within one-earner and two-earner households
also contribute and their drivers need to be better understood.

Published
2021-12-14
Section
Articles