Deaton Review Country Studies: A Trans-Atlantic Comparison of Inequalities in Incomes and Outcomes over Five Decades

Economics researchers and policy makers have worried about inequality in labor market outcomes for several decades. The debate focuses on changes in skill composition of the labor force, returns to skills such as education attainment and unobserved skills, and in institutions such as unions, minimum wage, and trade agreements. The Covid-19 pandemic shocked the global economy with implications for earnings, education, skills, and jobs, and thus inequality and the design of public policy responses. This project will use a coherent framework, across the major economies of Europe and North America, to study a broad set of inequalities and how the COVID-19 pandemic has changed these inequalities , and how policy in each economy has responded. This research project goes beyond the description and causes of inequality trends across countries, to study the potential role of policies at different stages on different groups. It also looks at how human capital policies and labor market regulations influence market inequalities, and how taxes and transfers can reduce inequalities in disposable income. The results of this will provide important inputs into labor market policies that could increase incomes and reduce income inequality in developed countries. The results will also help establish the US as the global leader in equality of labor market outcomes.

The project involves a network of 17 groups of researchers from across Europe and North America to understand the drivers of economic inequalities across high income countries. The teams will mobilize a vast array of data sources to study in detail differences across educational attainment, race, ethnicity, and immigration status, and the mechanisms by which households are able to smooth income shocks. In some countries the survey data include a direct link to administrative records, permitting a more rich and accurate assessment of inequalities across countries and the life course. The team from the United States will use both public-access data from the Current Population Survey (CPS) Annual Social Economic Supplement (ASEC), as well as restricted access survey and administrative that provides a direct link between the CPS ASEC and Social Security Administration's Detailed Earnings Records (DER). The project then proceeds with four related research strands. The first strand uses harmonized data to study the evolution of several economic inequalities before and during the COVID-19 pandemic. The second strand examines labor market inequalities in detail. The third strand highlights the role of education and training for non-university attendees and focusses on the impact of large cross-country differences in educational systems on inequality. The final strand looks at the tax and welfare systems and their effectiveness at addressing family income inequality. The results of this will provide important inputs into labor market policies that could increase incomes and reduce income inequality in developed countries. The results will also help establish the US as the global leader in equality of labor market outcomes.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.