The impact of unemployment on inequality and poverty in OECD countries

The purpose of this research is to examine the contribution of unemployment to income inequality and poverty in various OECD countries. These relationships have been explored using Luxembourg Income Study micro‐data. Considerable differences across OECD countries are revealed through the use of within‐household unemployment distributions. These differences help to explain most of the observed divergences in the relationship between unemployment and income distribution, in conjunction with the heterogeneous influence of social benefits on the economic position of the unemployed in these countries. A sub‐group decomposition analysis corroborates the limited effect of unemployment on income distribution in most of the considered countries. However, it seems clear that the unemployed are among those with the highest risk of experiencing poverty. JEL classification: D31, I32, J31.