[Excerpt] Since 1980, however, family income inequality in Taiwan has risen slowly but steadily. In this chapter, we apply decomposition methodologies devised by Fei and co-authors and by Shorrocks to Taiwan's Family Income and Expenditure Surveys to quantify the sources of Taiwan's rising family income inequality.
Our principal finding is that labor income inequality accounts for more than 100 percent of the observed change— that is, household income inequality would have increased even more had not business income, property income and transfer income contributed to an equalization of incomes. However, the reason for this is not that individual earnings became more unequally distributed, because they did not. Rather, working people combined into households in a way that led to increased household income inequality. This, along with the decline of multigenerational families in Taiwan, indicates the prime importance of demographic factors in explaining Taiwan's rising income inequality.