Generalized Entropy Measures of Long-run Inequality and Stability among Male Headed Households

Short and long-run inequalities and income stability among households with male heads are measured and analyzed using the Panel Study of Income Dynamics for 1969–81. The results suggest short-run inequalities are increasing over the period with fluctuations. These fluctuations contain transitory components which can be eliminated by smoothing of the data. Long-run measures are less subject to fluctuations and, therefore, provide a better measure of inequality. They show a decrease in inequality in the early periods but increases after the mid–1970’s. Several aggregator functions are used to compute "permanent income" variables for the long-run measures of inequality and stability. The measures are decomposed to reflect differences in age, education, and race. They are decomposed also into groups which are free of such group characteristics. Education has the most important influence on inequality. Stability profiles indicate, furthermore, most of the reduction in inequality in the early periods among households with male heads has been within particular groups. Reductions across groups are minimal.

Working Paper No. 41(1.50 MB)