Within-Group Earnings Inequality in Cross-National Perspective

Abstract

In this research I assess within-group inequality - earnings inequality occurring among otherwise similar individuals based on observed characteristics - in a cross-national comparative perspective. While scholarly interest in the within-group portion of inequality has grown over the past 25 years, virtually all studies focus on the US case. The current research shifts focus by assessing within-group inequality in a cross-national comparative study. I do so by constructing a unique data set of country-level measures of within- and between-group inequality for annual market earnings using Luxembourg Income Study (LIS) microdata from 1.36 million full-time prime-age male and female workers nested in 143 country-years, drawn from 28 countries spanning 40 years. I then document and describe basic between-country and longitudinal trends in the relationship between total inequality and within-group inequality. I find that in nearly all countries in the LIS, within-group inequality is the primary driver of levels and trends in inequality. As inequality increases, so too does the relative importance of within-group inequality. However, substantial cross-national heterogeneity based in labour market institutions and employment protection legislation is found. Theoretical and substantive implications are discussed.