The Comparative Statics and Dynamics of Income Distributions

Income distributions at different points of time are frequently compared and ranked by some measure of inequality, with low values being preferred to higher values. The present paper shows that such a ranking may be misleading, particularly when the dynamic properties of income distributions are considered, and provides alternative criteria, based on the regression and correlation of incomes over time. Estimates of the required regression and correlation coefficients for the United Kingdom are compiled from a special sample of incomes drawn from the data collected by the Department of Health and Social Security for adult males aged 30 in 1963. It is shown that no regression towards the mean took place during the period 1966-70 and, as a consequence, the rate of increase in the inequality of incomes was much greater than that occurring during the period 1963-66.