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Inequality in an Equal Society: Theory and Evidence

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  • Jochen O. Mierau
  • James Rockey

Abstract

We consider empirically the degree of wealth and income inequality that would prevail in a society in which, other than differences in age, everyone was equal. Theory suggests that life-cycle factors will still lead to substantial ‘natural’ inequality. Analysing cross-national data from the recently collected National Transfer Accounts we find that societies with no other source of inequality will exhibit substantial concentrations of income and wealth – Gini coefficients of circa 0.45 are common for income, purely due to these life-cycle effects. Using a modified Gini coefficient we find a substantial fraction of extant inequality can be attributed to this natural inequality. Finally, we show that if relative cohort sizes were equal to their long run values inequality would increase further.

Suggested Citation

  • Jochen O. Mierau & James Rockey, 2015. "Inequality in an Equal Society: Theory and Evidence," Discussion Papers in Economics 15/23, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:15/23
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    Cited by:

    1. Nolan, Matt, 2018. "Did tax-transfer policy change New Zealand disposable income inequality between 1988 and 2013?," Working Paper Series 7661, Victoria University of Wellington, Chair in Public Finance.

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    More about this item

    Keywords

    Income Inequality; Wealth Inequality; National Transfer Accounts.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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