published in: New Zealand Economic Papers, 2010, 44 (3), 217-229
A number of authors have documented an increase in earnings or income inequality in New
Zealand during the late 1980s and early 1990s, a period of major economic reform, however
no study has evaluated changes in inequality during the post-reform era. This paper applies a
recently-developed method for decomposing changes in inequality to New Zealand income
and earnings data and extends it to analyse changes in inequality between men and women.
Across the total working-age population, income inequality rose among both males and
females between 1998 and 2003. In both cases, the majority of this was unexplained by
changes in the observed determinants of income, however shifts in the distribution of
education and the associated returns were responsible for part of the increase. Among the
subset of workers, earnings inequality increased significantly for both genders. Although
changes in the returns to measured characteristics contributed to the rise in inequality, this
was partially offset by changes in the distribution of these characteristics. Between-gender
inequality fell with respect to both samples. In contrast to within-gender inequality, this was
largely explained by changes in the returns to the observed characteristics. Overall, there is
evidence that the male and female income distributions are converging, although both are
becoming more dispersed.
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