Modelling household income dynamics
This paper is about income and poverty dynamics and their socioeconomic correlates. The first half of the paper aims to establish some of the salient facts for Britain, applying the pioneering methods of Bane and Ellwood (1986) . Important for poverty dyn
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Abstract. This paper is about income and poverty dynamics and their socioeconomic correlates. The first half of the paper aims to establish some of the salient facts for Britain, applying the pioneering methods of Bane and Ellwood (1986). Important for poverty dynamics are changes in labour earnings from persons other than the household head, changes in non-labour income (including benefits), and changes in household composition, in addition to changes in the heads' labour earnings. The second half of the paper is a review and critique of the multivariate modelling frameworks which might be used to explain and forecast these salient facts for Britain or elsewhere. JEL classification: C23, C41, D31, 132 Key words: Income dynamics, poverty dynamics, income distribution
1. Introduction
This lecture is about the longitudinal dynamics of personal economic wellbeing, i.e. the patterns of change, from one year to the next, of needs-adjusted Revised version of Presidential Address to the European Society for Population Economics Twelfth Annual Congress, Amsterdam, 4-6 June 1998. The core funding support of the Economic and Social Research Council and the University of Essex is gratefully acknowledged. For helpful discussions and comments lowe many thanks to my ISER colleagues, especially Richard Berthoud, Nick Buck, John Ermisch, and Sarah Jarvis, and also to Co-Editor Paul Schultz, two referees, and to Bob Baulch, Anders Bjorklund, Simon Burgess, Rebecca Endean, Gordon Harris, Martha Hill, John Hills, Arie Kapteyn, Neil McCulloch, John Micklewright, Mike Noble, Jan Ondrich, Carol Propper, Martin Ravallion, and Tim Smeeding. Responsible editor: T. Paul Schultz.
K. F. Zimmermann et al. (eds.), Family, Household and Work © Springer-Verlag Berlin Heidelberg 2003
96
S.P. Jenkins
Table 1. Cross-section perspective on the British income distribution 1991-1996
Mean Gini coefficient Percentage below half contemporary mean Percentage below half 1991 mean Number of persons (unweighted)
1991
1992
1993
1994
1995
1996
259 0.31 17.8
269 0.31 16.6
272 0.31 17.3
274 0.31 16.6
288 0.32 17.1
290 0.32 16.4
17.8 11634
15.3 11001
15.1 10473
14.1 10476
12.4 10119
12.0 10511
Source: BHPS waves 1-6, data weighted using cross-section enumerated individual weights. Income is needs-adjusted household net income per person in January 1997 pounds per week (see Table 3 for details).
household net income for each person in the population. My aims are, first, to establish some of the salient facts for Britain about income dynamics in general and poverty dynamics in particular, and their socio-economic correlates, drawing on new evidence for the 1990s, and second, to review the multivariate modelling frameworks which might be used to explain and forecast these patterns for Britain and those for other countries. I offer a guide to the progress made and to the questions outstanding, and issue some challenges for future research in the hope that it will lead others to work in the area and take it forward. There is much to be done.
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