Essays on the Economics of Inequality

This thesis is comprised of three chapters which focus on inequality, and more closely, on the trends in inequality over time. Firstly, the second chapter addresses the issue of non-random selection into employment in the intergenerational mobility literature, by applying bounds to the distribution of wages conditional on parent income. We use the labour market attachment of the mother as a novel instrumental variable to tighten the bounds to the distribution of earnings. We find that there are substantial differences between parent income groups and changes over time by son's and daughter's. We find college to be important for all groups, but particularly for daughters. In addition, there is evidence of converging wages between sons and daughters for all parent income types over time.

The third chapter looks at the idea of a society in which everybody is the same at the same stage of the life-cycle will exhibit substantial income and wealth inequality. We use this idea to empirically quantify natural inequality - the share of observed inequality attributable to life- cycle profiles of income and wealth. We document that recent increases in inequality in developed countries are larger than observed rates would suggest. Extrapolating our measures forward suggests that natural inequalities will fluctuate over the next 20 years before settling to a new higher level.

Finally, in the fourth chapter, we document that male median Zeal incomes have been lower than that of their forebears, at every age, for the last 30 years. We show that this is true across the life-cycle, and that younger generations have had to wait longer to reach peak earnings. Further analysis shows that this decline is particularly concentrated on high-school graduates. We further decompose the decline in labour share being more prominent for later generations, across most industries.