The purpose of this paper is twofold. First, it introduces a novel inequality concept, named income composition inequality. Second, it constructs an indicator for its measurement. This paper argues that the study of income composition inequality across the income distribution allows for (i) novel political economy analysis of the evolution of economic systems and (ii) the technical assessment of the relationship between the functional and personal distribution of income. Following an empirical application on six European countries, this paper discusses possible avenues for future research on the matter, ranging from development issues to public finance. JEL-Classification: C430, E250

The purpose of this paper is twofold. First, it introduces a novel inequality concept, named income composition inequality. Second, it constructs an indicator for its measurement. This paper argues that the study of income composition inequality across the income distribution allows for (i) novel political economy analysis of the evolution of economic systems and (ii) the technical assessment of the relationship between the functional and personal distribution of income. Following an empirical application on six European countries, this paper discusses possible avenues for future research on the matter, ranging from development issues to public finance.

The paper investigates the relationship between capitalism systems and their levels of income and compositional inequality (how the composition of income between capital and labor varies along income distribution). Capitalism may be seen to range between Classical Capitalism, where the rich have only capital income, and the rest have only labor income, and Liberal Capitalism, where many people receive both capital and labor incomes. Using a new methodology and data from 47 countries over the past 25 years, we show that higher compositional inequality is associated with higher inter-personal inequality. Nordic countries are exceptional because they combine high compositional inequality with low inter-personal inequality. We speculate on the emergence of homoploutic societies where income composition may be the same for all, but Gini inequality nonetheless high, and introduce a new taxonomy of capitalist societies.

The paper investigates the relationship betweencapitalism systems and their levels of income andcompositional inequality (how the composition ofincome between capital and labor varies along incomedistribution). Capitalism may be seen to range betweenClassical Capitalism, where the rich have only capitalincome, and the rest have only labor income, andLiberal Capitalism, where many people receive bothcapital and labor incomes. Using a new methodologyand data from 47 countries over the past 25 years, weshow that higher compositional inequality is associatedwith higher inter-personal inequality. Nordic countriesare exceptional because they combine highcompositional inequality with low inter-personalinequality. We speculate on the emergence ofhomoploutic societies where income composition maybe the same for all, but Gini inequality nonethelesshigh, and introduce a new taxonomy of capitalistsocieties. (Stone Center Working Paper Series) Revised