This dissertation consists of three empirical papers on income and earnings inequality. The first paper extends the existing literature by examining the sources of change in income inequality, between years 1969 and 2006, primarily focusing on the inter-relationship between variability of market earnings for families headed by individuals expected to be in the working age population and family structure as influences. Our findings emphasize the close correspondence between earnings and income inequality during the 1990s and early 2000s. In the 1980s, experience of the United States diverged from that of the European countries (except for the United Kingdom) because of significant widening in its earnings distribution although these economies were subject to a common technological shock. Some researchers argued that relatively more rigid labor market institutions were the primary reason behind the more stable earnings patterns in Europe. However, Germany, which is the largest European economy, has implemented major policy changes in favor of decentralization in the labor markets during the 1990s and early 2000s. Therefore, the second paper adopts a cross-national comparison to understand the educational earnings differentials between the United States and Germany in an economic environment with major policy changes. In particular, it assesses the contribution of market forces and wage-setting institutions within a supply and demand framework. Third paper complements the prior analysis based on cross-sectional measures of inequality by focusing on longer term measures of inequality. In particular, we explore the characteristics of income dynamics over time in the United States and Germany through intragenerational mobility. In order to do this, we focus on a more comprehensive measure of well-being, which is post-tax and post-transfer government income.
