The impact of demographic and family structure changes on income distribution in Hungary and OECD countries

Abstract

This paper analyses the impact of socio-demographic trends on income inequality over the past two to three decades. The main socio-demographic trends in Hungary were largely in line with OECD-wide changes. Family structures are becoming increasingly complex and there is a growing disconnect between nuclear families and households. There has been a general retreat from marriage and a growth in both cohabitation and multigenerational households, as well as in the share of single person households. Births outside of marriage increased as well as the share of children living in other than two-parent family structures, and the number of children per household decreased. These changes in family structure fed into the broader cross-sectional development of ageing populations. However, most of these demographic changes had only a modest (upward) impact on trends in income inequality. In Hungary, three of the examined trends had a more significant impact than in other OECD countries: assortative mating; decline in the number of children; and changes in household types taken together. The inequality impact was typically larger on market than on disposable incomes, highlighting the strong inequality mitigating effect of the tax-benefit systems.1 This article is based on analyses from the forthcoming OECD-EC report on the impact of shifting demographic and family structures on income inequality and its policy implications (OECD, in press). A summary of findings has been published in Förster and Vindics, 2020. The authors are grateful to István György Tóth, Attila Melegh, Lívia Murinkó and two anonymous referees for their constructive remarks and valuable suggestions; they have no responsibility for any remaining errors. The views expressed are not necessarily those of the OECD or its member countries.

Changing Household Structures, Household Employment, and Poverty Trends in Rich Countries

“…Decomposing the overall change in household earnings inequality among working-age households with at least one earner for 23 OECD countries for periods from (mostly) the mid/late 1980s to the mid 2000s, it found that assortative mating and changes in household structure contributed to greater inequality in household earnings, but to a much lesser extent than changes in men's earnings dispersion and men's and women's employment rates. More recently OECD (2020) and Förster and Vindics (2022) carry out a similar analysis across many OECD countries and again conclude that demographic composition plays only plays a minor role in explaining changes in household market income inequality. Harkness (2013) presents a comparative analysis of the impact of increasing women's labour force participation on household earnings inequality.…”