How the Distribution of After-Tax Income Changed Over the 1990s Business Cycle: A Comparison of the United States, Great Britain, Germany and Japan

Abstract

Using kernel density estimation we find that over the 1990s business cycles in the United States and Great Britain the entire distribution of after-tax (disposable) income moved to the right while inequality declined. In contrast, Germany and Japan experienced less growth, a rise in inequality, and a decline in the middle mass of their distributions, that spread mostly to the right, much like in the United States over its 1980s business cycle. Inequality fell within the older populations of all four countries; inequality also fell within the younger populations of the United States and Great Britain, but it rose substantially in Germany and Japan.