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Older or Wealthier?: The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries

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  • Ingvild Almas
  • Magne Mogstady

Abstract

Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross-section data, we may confuse older with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates transitory wealth inequality due to age, yet preserves inequality arising from other factors. This new method is superior to existing methods, like the much used Paglin-Gini, which is shown to have several problems. A new cross-country comparable database reveals that the choice of method is empirically important: Existing methods yield erroneous wealth inequality rankings of countries.

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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 181.

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Length: 39 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp181

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Keywords: Wealth inequality; Life cycle; Age adjustments; Gini coefficient;

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Cited by:
  1. Ingvild Almås & Tarjei Havnes & Magne Mogstad, 2010. "Baby Booming Inequality? Demographic Change and Earnings Inequality in Norway, 1967-2000," CESifo Working Paper Series 3200, CESifo Group Munich.

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