"Determinants of the evolution of income inequality : a semi-parametric decomposition for France, 1970-2019"

Abstract :

Over the past 50 years, the French economy and population have undergone major changes. Some of these changes reflect what has happened in most developed countries : population aging, increasing participation of women in the labor market, rising unemployment, skill-based technological change, declining household size... Another part is specific to France : a sharp reduction in income inequality until the 1990s and then a moderate increase in inequality, a massive exit from poverty of retired households thanks to rising pensions. We analyze the evolution of income inequality in France between 1970 and 2019, in sub-periods according to the economic cycle or the electoral cycle. We measure the respective contributions of changes in household structure, occupations, wages, taxes and transfers to the evolution of income inequality using a semi-parametric decomposition approach. The results show a strong contribution of the pension system to the decline in inequality at the beginning of the studied period, before a neutralization and even a recent reversal of the impact. The strong increase in female employment did not lead to a fall in inequality of household income, even the opposite in some sub-periods, probably because of homogamy. Finally, taxes had a weak impact on inequality changes, in contrast to social benefits which led to a fall in inequality over the entire study period.