GDP Per Capita Versus Median Household Income: What Gives Rise to the Divergence Over Time and How Does this Vary Across OECD Countries?

30 Pages Posted: 6 Jun 2020

See all articles by Brian Nolan

Brian Nolan

Institute for New Economic Thinking at the Oxford Martin School

Max Roser

University of Oxford

Stefan Thewissen

Leiden University - Department of Economics, Students

Date Written: September 2019

Abstract

Divergence between the evolution of GDP per capita and the income of a “typical” household as measured in household surveys is giving rise to a range of serious concerns, especially in the USA. This paper investigates the extent of that divergence and the factors that contribute to it across 27 OECD countries, using data from OECD National Accounts and the Luxembourg Income Study. While GDP per capita has risen faster than median household income in most of these countries over the period these data cover, the size of that divergence varied very substantially, with the USA a clear outlier. The paper distinguishes a number of factors contributing to such a divergence, and finds wide variation across countries in the impact of the various factors. Further, both the extent of that divergence and the role of the various contributory factors vary widely over time for most of the countries studied. These findings have serious implications for the monitoring and assessment of changes in household incomes and living standards over time.

Keywords: economic growth, household incomes, inequality

JEL Classification: D31, D60, E01

Suggested Citation

Nolan, Brian and Roser, Max and Thewissen, Stefan, GDP Per Capita Versus Median Household Income: What Gives Rise to the Divergence Over Time and How Does this Vary Across OECD Countries? (September 2019). Review of Income and Wealth, Vol. 65, Issue 3, pp. 465-494, 2019, Available at SSRN: https://ssrn.com/abstract=3619327 or http://dx.doi.org/10.1111/roiw.12362

Brian Nolan (Contact Author)

Institute for New Economic Thinking at the Oxford Martin School ( email )

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+441865610401 (Phone)

Max Roser

University of Oxford ( email )

Stefan Thewissen

Leiden University - Department of Economics, Students ( email )

Netherlands

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