Stability of household income in European countries in the 1990s

The patterns of change in the annual household income in the countries of the European Community during the years 1994–1999 are explored. The income is modelled by mixtures of multivariate log-normal distributions, and the mixture components are interpreted as representing one subpopulation with steady increments and others with various levels of volatility. The method is extended to models for a combination of log-normal and categorical variables. An index of income stability is defined for the countries. Throughout, we emphasise graphical summaries of the results.