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Baby Booming Inequality? Demographic Change and Earnings Inequality in Norway, 1967-2000

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  • Ingvild Almås
  • Tarjei Havnes
  • Magne Mogstad

Abstract

In this paper, we demonstrate how age-adjusted inequality measures can be used to evaluate whether changes in inequality over time are due to changes in the age structure. To this end, we use administrative data on earnings for every male Norwegian during 1967-2000. We find that the substantial rise in earnings inequality over the 1980s and into the early 1990s, is to some extent driven by the fact that the large baby boom cohorts are approaching the peak of the age-earnings profile. We further demonstrate that the impact of age adjustments on the trend in inequality during the period from 1993-2000 is highly sensitive to the method used: while the most widely used age-adjusted inequality measure indicates little change in inequality over this period, a new and improved age-adjusted measure suggests a decline in inequality.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-10/cesifo1_wp3200.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3200.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3200

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Keywords: inequality trend; age structure; age-earnings profile; Gini coefficient;

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References

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  2. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2008. "Earnings Functions and Rates of Return," Journal of Human Capital, University of Chicago Press, vol. 2(1), pages 1-31.
  3. Shorrocks, Anthony & Wan, Guanghua, 2004. "Spatial Decomposition of Inequality," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Erik Fjærli & Rolf Aaberge, 2000. "Tax Reforms, Dividend Policy and Trends in Income Inequality Empirical Evidence based on Norwegian Data," Discussion Papers 284, Research Department of Statistics Norway.
  5. Ingvild Almas & Magne Mogstady, 2009. "Older or Wealthier?: The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries," SOEPpapers on Multidisciplinary Panel Data Research 181, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Rolf Aaberge & Magne Mogstad, 2010. "Robust Inequality Comparisons," Discussion Papers 623, Research Department of Statistics Norway.
  7. Heckman, James J. & Lochner, Lance & Todd, Petra E., 2003. "Fifty Years of Mincer Earnings Regressions," IZA Discussion Papers 775, Institute for the Study of Labor (IZA).
  8. Aaberge, Rolf & Mogstad, Magne & Peragine, Vito, 2011. "Measuring long-term inequality of opportunity," Journal of Public Economics, Elsevier, vol. 95(3), pages 193-204.
  9. Peter J. Lambert & André Decoster, 2005. "The Gini Coefficient Reveals More," Center for Economic Studies - Discussion papers ces0508, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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  12. Konow, James, 1996. "A positive theory of economic fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 13-35, October.
  13. Almås, Ingvild & Cappelen, Alexander W. & Lind, Jo Thori & Sørensen, Erik Ø. & Tungodden, Bertil, 2011. "Measuring unfair (in)equality," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 488-499, August.
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  16. Nelson, Eric R, 1977. "The Measurement and Trend of Inequality: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 497-501, June.
  17. Paglin, Morton, 1979. "The Measurement of Inequality: Reply," American Economic Review, American Economic Association, vol. 69(4), pages 673-77, September.
  18. Atkinson, A B, 1971. "The Distribution of Wealth and the Individual Life-cycle," Oxford Economic Papers, Oxford University Press, vol. 23(2), pages 239-54, July.
  19. Paglin, Morton, 1989. "On the Measurement and Trend of Inequality: Reply," American Economic Review, American Economic Association, vol. 79(1), pages 265-66, March.
  20. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
  21. Almås, Ingvild & Mogstad, Magne, 2010. "Older or Wealthier? The Impact of Age Adjustment on Cross-Sectional Inequality Measures," Discussion Paper Series in Economics 9/2010, Department of Economics, Norwegian School of Economics.
  22. Foster, James E & Shorrocks, Anthony F, 1991. "Subgroup Consistent Poverty Indices," Econometrica, Econometric Society, vol. 59(3), pages 687-709, May.
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Cited by:
  1. Lüthen, Holger & Bönke, Timm & Corneo, Giacomo, 2012. "Lifetime Earnings Inequality in Germany," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62074, Verein für Socialpolitik / German Economic Association.
  2. Aaberge, Rolf & Mogstad, Magne, 2010. "Robust Inequality Comparisons," IZA Discussion Papers 4769, Institute for the Study of Labor (IZA).
  3. Ingvild Almås & Magne Mogstad, 2009. "Older or Wealthier? The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries," Discussion Papers 583, Research Department of Statistics Norway.

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