The impact of wives' earnings on income inequality: Issues and estimates

Abstract

We estimate the extent to which rising family income inequality can be explained by changes in the earnings of married women. We develop a decomposition equation that separates single persons from married couples (decomposition by population group) and, for married couples, distinguishes the impact of wives' earnings from other sources of income (decomposition by income source). Despite the rising correlation between husbands' and wives' earnings, changes in wives' earnings do not explain a substantial portion of the increase in family income inequality. Our results contradict those of some previous analyses. The inconsistency of recent estimates can be traced to the use of a variety of conceptually different approaches in the previous literature. We clarify these approaches by explicitly distinguishing the conceptual issues, analyzing the empirical components, and providing comprehensive estimates.