The evolution of income inequality in households of various sizes

In one of our previous posts we addressed the issue of the household Gini ratio dependence on the average household size. We demonstrated that the Gini has not been increasing, as many economists say, but was actually constant as the Gini for personal incomes [1, 2].

We would not repeat the technical part of the post. Briefly, we showed that the household Gini is biased up in 2007 relative to 1994 because the portion of smaller and thus lower income households increased. Accordingly, the average size decreased.  To do this, we normalized the household income distribution to the total number of households and corrected the income bins to the total increase in nominal GDP and the change in the total number of households.  This operation is similar to that used for the Lorenz curve calculation. 

In this post, we present the evolution of income distribution in various household sizes and the same procedure as for the whole distribution. Unfortunately, there are no estimates of Gini ratio in all household sizes for 1994, but Figure 1 depicts these estimates for 2007. 


Figure 1. Gini ratio as a function of the household size in 2007.

Figure 2 compares the household income distributions (density functions) in 1994 and 2007. There were relatively more small-size households with one and two people in expense of mid-income households of 3 and more people.  Not having the 1994 Gini estimates, we may say that the Gini for the small-size households increased and accordingly decreased for the larger households. But the effect of changing dispersion (and thus Gini) in any household size is likely smaller than the effect of larger households split with the creation of an excess of smaller households.

Figure 2. The evolution of density functions in various household sizes. 

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