Income Inequality and Mobility: A Nonparametric Decomposition Analysis by Age for Switzerland in the 80s and 90s

This paper investigates income inequality and mobility for the prime age working population of Switzerland in the early 80s and 90s. The empirical methods applied are based on nonparametric kernel density estimation. Mobility is interpreted here in terms of inequality reduction when the accounting period for income is extended. We find that income inequality increased between the early 80s and early 90s. The computation of within inequality reveals that age explains a significant fraction of total inequality. An important component of inequality is due to short-term deviations from the long-run income profile. Mobility in the sense of inequality reduction has declined for market income, but in turn increased for disposable income.