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The Measurement of Income Distribution Dynamics when Demographics are correlated with Income

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Author Info

  • Michael Grimm

    (University of Göttingen, Department of Economics, DIW Berlin)

  • Denis Cogneau

    (DIAL - UR CIPRÉ de l’IRD)

Abstract

The purpose of our paper is to derive instructive analytics on how to account for differentials in demographic variables, in particular mortality, when performing welfare comparisons over time. The idea is to apply various ways of `correcting' estimated income distribution measures for `sample selection' due to differential mortality. We implement our approach empirically using three waves of the Indonesian Family Life Surveys (IFLS). We distinguish the direct effect of mortality, i.e. individuals who die leave the population and no longer contribute to monetary welfare, from the indirect effect, i.e. the impact on survivors in the deceased's household who may experience a decrease or increase in monetary welfare. In the case of Indonesia, we show that the direct and indirect effects of mortality on income distribution have opposite signs, but are roughly the same in magnitude. We also show that the effects of other demographic changes- such as changes in the structure of fertility, migration and educational attainment- dominate the effects of mortality, whether direct or indirect. However, we find that none of these demographic developments is substantial enough to explain a significant part of the change in income distribution, regardless of whether the pre-crisis period (1993- 1997) or the post-crisis period (1997-2000) is considered.

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File URL: http://128.118.178.162/eps/lab/papers/0502/0502003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0502003.

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Length: 38 pages
Date of creation: 15 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0502003

Note: Type of Document - pdf; pages: 38
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Web page: http://128.118.178.162

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Keywords: Differential Mortality; Income Distribution Dynamics; Welfare Comparisons; Decomposition.;

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Cited by:
  1. Sanjaya, M Ryan, 2007. "Health cost in Indonesia: evidences from IFLS and Susenas data," MPRA Paper 13986, University Library of Munich, Germany.
  2. Grimm, Michael, 2006. "Mortality and survivors' consumption," Proceedings of the German Development Economics Conference, Berlin 2006 9, Verein für Socialpolitik, Research Committee Development Economics.
  3. Corinna Ahlfeld, 2009. "The scapegoat of heterogeneity - How fragmentation influences political decisionmaking," Departmental Discussion Papers 143, University of Goettingen, Department of Economics.
  4. Petra Enß & Robert Schwager, 2006. "Kommunaler Finanzausgleich und Gewerbesteuerhebesätze in Niedersachsen," Departmental Discussion Papers 127, University of Goettingen, Department of Economics.
  5. Grimm, M., 2010. "Does inequality in health impede growth?," ISS Working Papers - General Series 501, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  6. Renate Ohr, 2009. "European Monetary Union at Ten: Had the German Maastricht Critics Been Wrong?," Departmental Discussion Papers 141, University of Goettingen, Department of Economics.
  7. Sascha Wolff, 2006. "Migration und ihre Determinanten im ost-westdeutschen Kontext nach der Wiedervereinigung: Ein Literaturüberblick," Departmental Discussion Papers 130, University of Goettingen, Department of Economics.

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