Economic Inequality and the Household

Household changes and the role of welfare institutions across countries

Raffaele Grotti

• Publisher: Ledizioni
• Year: 2020
• eBook ISBN: 9788855261807
• Topic: Social Sciences
• Subtopic: Urban Sociology
• Index: Social Sciences

Concerns about economic inequality can be dated back to the ancient Greece and in the Roman law (cf. Roemer 1996; World Bank 2006), and inequality has continued to be a subject of interest up to nowadays (an example can be found in Van Parijs 1995; 2015).Notwithstanding, the empirical interest on inequality vanished after the WWII. This was a reaction to the decline, and the following stagnation, that income inequality experienced in that period. In this regard, Aaron observed in 1978 that studying inequality were as exciting as watching the grass grow. However, as also Figure 1 shows, since the 1980s the vast majority of industrialized countries experienced rising income inequality. The sharpest increase in relative terms has been observed in northern Europe, traditionally characterized by low levels of inequality, but an even greater increase in absolute terms has been registered in countries reporting the highest levels of inequality: such as the United States and the United Kingdom (Atkinson, Rainwater and Smeeding 1995; Gottschalk and Smeeding 2000; OECD 2008; 2011; Brandolini 2009; Brandolini and Smeeding 2009; Esping-Andersen 2009).Consequently, as Atkinson observed in 1997, income distribution has been 'brought in from the cold' (cf. also Jenkins and Micklewright 2007; Salvedra, Nolan and Smeeding 2009). Indeed, from the 1980s onwards the interest in economic inequality has been revitalized, and represents now one of the core concerns and an important field of research of many disciplines, including sociology, economics, and demography.This book is inserted in this recent debate, and it will mainly profit from the theoretical and empirical contributions of the last three decades.

Chapter 1

Theoretical framework

This chapter aims to present the general theoretical framework of this book. It is not intended as a complete review of the literature and especially of the theoretical considerations upon which past studies have been based. The empirical chapters that constitute the book, although they may be located under the same theoretical frame, address the issue of inequality and the household in different ways. For these reasons, specific theoretical considerations will be discussed in each empirical chapter, in accordance with the specific research questions that will be addressed.

The chapter is structured as follows: it begins with a presentation of the relevance of the topic of (in)equality. Next, I define my unit of analysis, namely the household. Then, I present the general theoretical framework through which the issue of household income inequality will be approached. Here, the attention is directed to the integration of the three main inequality-shaping institutions: the state, the market and the family. The next section, focuses on the specific role that families/households play in the allocation and redistribution of resources – i.e. income. The issue is presented posing particular attention on how the demographic and economic composition of households is linked to inequality and how, consequently, household changes can lead to changes in inequality. The chapter concludes with a focus on ‘life-time-inequality’ linking household’s – demographic and economic – events to income dynamics.

Why should we care about inequality?

If we omit the fact that the study of inequality can be simply driven by our scientific interest in this topic – and that this scientific interest can be simply driven by personal preferences – we can list mainly two reasons to support the relevance of the topic: a normative reason and an instrumental one (Salverda, Nolan and Smeeding 2009).

Normative justifications

One normative reason is based on the acceptance that societies have on inequality and equity (fairness) (Osberg and Smeeding 2006; McCall and Kenworthy 2009). For example, the study of Osberg and Smeeding, covering 27 countries, reveals that the majority of the interviewed agree on the fact that ‘income differences are too large’.

Although this feeling should be enough to motivate scientific research on inequality, normative point of views can also be traced in the history of human thought: several thinkers have approached the topic of equality by grounding it in the idea of justice. Equality and justice are closely related, indeed. As Roemer pointed out, the object of the theories of distributive justice concerns with ‘how a society or group should allocate its scarce resources or product among individuals with competing needs or claims’ (1996: p. 1). Concerns about (in)equality and justice can be dated starting from thousands of years ago. Probably the oldest manifestations of concerns with equality come from religion. In a few major world religions, the principle of equality is present in, or can be derived from, their credo. Concerning the secular tradition, the theme of equality can be historically traced in the ancient Greece in Plato and Aristotle and in the Roman law (cf. Roemer 1996; World Bank 2006).

If we make a jump ahead of a couple of millenniums, thinking about social justice was greatly influenced by utilitarians, according to whom the social goal should be to achieve ‘the greatest happiness for the greatest number’ (Bentham [1781] 1970; Mill [1861] 1998). Utilitarianism, in its strict classical doctrine, postulate that society is rightly ordered, and therefore just, when its major institutions are arranged so as to achieve the greatest net balance of satisfaction summed over all the individuals belonging to it. Thus, utilitarians postulate the maximization of the sum of the utilities (or well-being or human welfare) of all people taken together, irrespectively of the utility of each person taken singularly. If this is the case, utilitarians cannot be considered as egalitarians. However, we have to recognize that in a certain sense they are. Indeed, equality enters in the utilitarian formula in terms of equal treatment of individuals in the space of gains and losses of utilities: each individual counts one in the process of utilities aggregation.

Therefore, also utilitarianism seems to request equality. This point is clearly expressed in Sen (1992). According to him, the common feature of every normative theory of social arrangements is the request of equality in something. What changes among these theories is the ‘space’ in which equality is request.

A step beyond utilitarianism was made from the ‘70s of the 20^th century by a number of influential thinkers including John Rawls, Robert Nozick, Amartya Sen, Ronald Dworkin, and John Roemer. Although the theorization of each of these authors shares much in common, they differ in an important respect: the space for which they request equality. This last issue is a fundamental one, and indeed it occupies a relevant place in Sen’s ‘Inequality reexamined’ (1992). In this book he argues that there are two focal issues for ethical analysis of equality: ‘why equality?’ and, ‘equality of what?’. In his treatise, it is the second question that represents the main issue because, as he wrote, it is not possible ‘to defend or criticize equality without knowing what on earth we are talking about, i.e. equality of what feature (e.g. incomes, wealths, opportunities, achievements, freedoms, rights)? We cannot answer the first question without addressing the second’ (Sen 1992: p. 12). As said, different theories give different answers to this question, namely they focus on different spaces.

John Rawls, for example, in ‘A theory of justice’ (1971) contested the utilitarian view of distributive justice. In his theory of justice as fairness, the space of equality should not be the utility (or well-being), but rather the ‘primary goods’. Primary goods are first defined by Rawls in broad categories, as ‘rights and liberties, opportunities and powers, income and wealth’ (p. 92). In a more recent work, he gave a more specific formulation of what prima...

Table of contents

• Cover
• Economic inequality and the household
• Contents
• Introduction
• Chapter 1. Theoretical framework
• Chapter 2. Are household structure and economic composition responsible for inequality
• Chapter 3. Does gender equity boost economic inequality?
• Chapter 4. Income dynamics after job-loss in Germany and the US
• Summary and conclusions
• Bibliography