Changing family structure and income inequality in Finland 1990-2009 - a decomposition analysis

Abstract

OBJECTIVES This thesis examines how demographic shifts in population have affected distribution of income in Finland during 1990–2009. Attention is given to changes in family structure: increased number of couples without children, decreased number of couples with children, growth of households of one and aging of population. DATA AND METHODOLOGY Income distribution survey data from Statistics Finland for years 1990–2009 is used in the analysis. Inequality is measured for equivalent disposable income. Three indices from generalized entropy family are used as measures for inequality. Inequality is decomposed by population subgroups to describe inequality within household groups and between household groups. A decomposition of changes in inequality is used to study how much shifts in family structure account for changes in inequality. Inequality is also decomposed by income sources to describe relative roles of earned incomes, capital incomes, received transfers and taxes in comprising of inequality. RESULTS The results show that most of inequality is caused by inequality within household groups and a minor part is caused by differences between household groups. Changes in family and household structure have had a minor role for increase of income inequality. Changes in household structure have affected inequality increasingly but they caused only small proportion of total increase. Results of earlier research are confirmed about increased role of capital incomes as explaining overall inequality. The changes in upper part of income distribution have been important factor for changes in inequality.