A great challenge for many developed economies is rising inequality, manifesting in dimensions such as earnings, wealth, and access to high-quality education. Moreover, as economic advantage is partly transferred across generations, inequality today is likely transferred to future generations. Inequality in economic outcomes may arise from inequality in opportunity, or different forms of discrimination, leading to disadvantage for particular groups such as women.
1. Trends in cross-sectional earnings inequality
Inequality in earnings dramatically increased over the past several decades in countries such as the US and Germany as well as many other economies around the world. This is a major concern as inequality is likely to lead to societal frictions and may have severe political consequences.
Past and current research is concerned with questions that include: How has earnings inequality evolved over time in various countries? Have demographic changes and changes in workforce composition contributed to the rise in earnings inequality? How has technological change affected earnings inequality and what role do firms play in this context? Does earnings inequality differ across different population groups, and what is the relation between migration and earnings inequality?
2. Earnings inequality and institutions
Whereas some countries, such as the US and Germany, experienced a sharp rise in earnings inequality over the past few decades, earnings inequality has remained roughly stable in other countries, such as France.
Past and current research is concerned with questions that include: Is there a link between the rise in earnings inequality in a country and the country’s labour market institutions, such as its system of industrial relations? Do countries face a trade-off between rising earnings inequality on the one hand, and rising unemployment rates on the other hand? What can governments do to halt the rise in earnings inequality – for example, are minimum wages successful at reducing earnings inequality, without diminishing employment opportunities of low-wage workers?
3. Gender inequality
While women have made substantial progress over the past few decades in catching up to men in terms of employment rates and wages, considerable gender gaps remain. Researchers at CReAM have extensively studied the determinants behind these gaps.
Specific research questions include: To what extent and through which channels do children impact on women’s career choices and gender gaps? Do children affect women’s occupational and educational choices even before they are born? Does the cultural environment a woman grew up in, or her current cultural environment, influence mothers’ post-birth labour market choices? Do governmental policies, such as parental leave policies or the availability of early child care, help reducing wage and employment gaps between men and women? Are firm-provided family friendly policies more successful at closing gender gaps than one-size-fits-all governmental policies?
4. Inequality beyond earnings
Inequality may manifest itself not just through individual earnings at a given point in time, but also in other dimensions. A focus on earnings inequality may understate the true extent of societal inequality, for example if individuals who earn more are able to save more or experience higher returns to their savings. Inequality may further be aggravated on the level of the household if low-earning individuals are less likely to be married or primarily marry individuals who themselves are low earners.
Current and past research investigates questions such as: How has wealth inequality evolved over time and what role does housing and home ownership play in this context? Has inequality in household earnings increased more or less than inequality in individual earnings? Did increases in cross-sectional earnings inequality come hand in hand with an increase in lifetime inequality?
CReAM researchers publish their findings on this and other topics in top peer-reviewed journals. Click here to see our published research.