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Does an Aging Population Increase Inequality?

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  • Weizsäcker, Robert K. von
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    Abstract

    The paper reviews recent research on the impact of an aging population on the distribution of income. After briefly discussing the demographic conditions responsible for population aging, a short account is given of demographic trends in the industrialized world. In order to disentangle the many potential channels by which an aging society affects the dispersion of income, several levels of aggregation are distinguished. The paper differentiates between intra- and intergenerational issues, between direct and indirect demographic inequality effects, and between the distribution of current and lifetime income. It emphasizes the critical role of age-related redistributive tax-transfer systems, like public pension schemes and health care systems. Sources of distributional policy conflicts are identified at both the cross-section level and the lifetime level of income inequality. The institutional design of intergenerational burden sharing, individual disincentive reactions, shifts in age-income profiles related to cohort size, and politicoeconomic repercussions are shown to drive the relation between population aging and income distribution in distinct and partially opposite ways.

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    File URL: https://ub-madoc.bib.uni-mannheim.de/1058/1/535.pdf
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    Bibliographic Info

    Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 535.

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    Date of creation: 1995
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    Handle: RePEc:mnh:vpaper:1058

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    1. 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.
    2. Dooley, Martin D & Gottschalk, Peter, 1984. "Earnings Inequality among Males in the United States: Trends and the Effect of Labor Force Growth," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 59-89, February.
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    10. Barthold, Thomas A., 1993. "How Should We Measure Distribution?," National Tax Journal, National Tax Association, vol. 46(3), pages 291-99, September.
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    14. Klevmarken, N Anders, 1993. "Demographics and the Dynamics of Earnings," Journal of Population Economics, Springer, vol. 6(2), pages 105-22, May.
    15. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
    16. Pestieau, Pierre, 1989. "The Demographics of Inequality," Journal of Population Economics, Springer, vol. 2(1), pages 3-24.
    17. Paglin, Morton, 1975. "The Measurement and Trend of Inequality: A Basic Revision," American Economic Review, American Economic Association, vol. 65(4), pages 598-609, September.
    18. Cowell, Frank A, 1984. "The Structure of American Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 30(3), pages 351-75, September.
    19. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
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