Selected Issues Papers

Sustainable Path to Inclusive Growth in Japan: How to Tackle Income Inequality?

Author/Editor:

Purva Khera ; Yun Gao

Publication Date:

July 1, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Market income inequality in Japan has been on a steady rise since the 1980s, and is now close to the OECD average. Gross and disposable income inequality, on the other hand, have risen much less but remain higher relative to several comparator countries. This paper employs inequality index decompositions by income source using household panel survey data from 2010-19 to identify the factors driving income inequality in Japan. Results indicate that while increase in the employment of females and the elderly in the last decade has helped lower income inequality, this has been offset by them being mostly employed in low-paid part-time nonregular jobs. Rapid aging of the population has also exacerbated income inequality over time. Moreover, while fiscal redistributive effects of social transfers are found to be a somewhat equalizing force, its impact on inequality is relatively weaker.

Series:

Selected Issues Paper No. 2024/026

Subject:

Aging Capital income Disposable income Economic growth Employment Inclusive growth Income Income distribution Income inequality Labor Labor markets National accounts Population and demographics Wages

Frequency:

Regular