The Distribution of Income in Ireland (2000) - Combat Poverty Agency

94 The Distribution of Income in Irelandcomposition of the Gini coefficient has no implicit referencedistribution and therefore should not be interpreted as a measureof the effect of an income source on inequality, and that decompositionsbased on the Gini coefficient are not suitable toanalysing changes in inequality over time. They analyse suchchanges using the coefficient of variation, developing several"thought experiments". Here this approach is applied to thecontribution of wives' earnings to household income inequalitybetween 1987 and 1994.The first experiment was to compare the observed inequalityin household incomes in 1987 to the inequality that wouldhave been seen if the distribution of wives' earnings hadchanged to the 1994 pattern, but all other income componentshad stayed fixed at their 1987 levels. The second experimentwas to compare the actual distribution in 1994 with what thelevel of inequality would have been if wives' earnings hadstayed at their 1987 levels. The results using these two alternativecounterfactuals may differ because the base year valuesdiffer between the two — a common problem in other areas, forexample using base-year versus end-year weights in constructingindex numbers. As in those contexts, here we deriveboth sets of results and see if they show the same broad pattern.The results for both decompositions are given in TableAl.l.Appendix 1on the distribution of household income. The reduction in dispersionin earnings across all married women (reflecting increasingnumbers employed), as well as a reduction in the correlationbetween wives' earnings and non-labour income, wereequalising in terms of the household income distribution. Thesewere large enough to outweigh the effect of the increased correlationbetween the earnings of spouses, which in itself wouldhave worked in the opposite direction.95Table Al.l: Decomposition of Changes in the Coefficient ofVariation for Gross Household Income, 1987-1994Observed 19871987 with women's earnings at 1994 levels1994 with women's earnings at 1987 levelsObserved 1994Coefficient of Variation0.6780.671/0.663*0.656/0.662*0.644» * * » »*»« «*«*•• * ** conelationsZ^lnT^!!^! between income sources11 Ae-These results suggest that, despite the fact that the correlationin spouses earnings has increased substantially over this period,the evolution of wives' earnings had an equalising effect