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Income Risk, Consumption Inequality, and Macroeconomy in Japan

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Author Info
Tomoaki Yamada
Abstract

In this paper, using an OLG model with heterogeneous households, we investigate economic inequality in the recent decades in Japan. We decompose the causes of economic inequality into macroeconomic factors and a demographic factor, and demonstrate that the earning inequality in the model replicates the actual evolution of inequality in Japan. Based on a counterfactual simulation, we demonstrate that time-varying macroeconomic factors play an important role in the evolution of economic inequality. In particular, we show that the low growth rate of total factor productivity in the 1990s in Japan limited the dispersion of economic inequality.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-041.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-041.

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Date of creation: Mar 2009
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Handle: RePEc:hst:ghsdps:gd08-041

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Related research
Keywords: Income risk; Consumption inequality; Population aging;

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

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