Secular Equalization and Cyclical Behavior of Income Distribution.

T. P. Schultz

Expert InsightsPublished 1967

A model for examining Kuznets' classic theory that in more developed countries the size distribution of income among persons and among families has become less unequal during the 20th century. The model incorporates cyclical factors that are hypothesized to displace the distribution of income from its secular or equilibrium trend. Annual personal income data from the Netherlands are used to estimate the model and to test the implicit hypotheses. The study shows that (1) income inequality has decreased markedly in the Netherlands during the last 50 years; (2) secular equalization stems from the increased labor share of income and its more equal distribution; (3) the secular trend is stronger when variation in income associated with age and sex are eliminated; (4) aggregate disequilibrium in factor markets that induce cyclical change in price and employment levels appears to account for much of the behavior of income inequality; (5) the distributional effect of changes in the price level has reversed and the effect of change in labor productivity has increased in the period since World War II. 26 pp. Refs.

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Schultz, T. P., Secular Equalization and Cyclical Behavior of Income Distribution. Santa Monica, CA: RAND Corporation, 1967. https://www.rand.org/pubs/papers/P3519-1.html.
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