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The Role of Employment and Redistribution for Lifetime Income Inequality in Denmark

Author

Listed:
  • Jonas Maibom
  • Trine Schack
  • Rune Vejlin

Abstract

Using Danish administrative data from 1980–2023, we analyze lifetime income (both earnings and net-income) inequality and its evolution across cohorts. Earnings inequality rises with age from midlife onward and is highest among the low educated and lowest among those with medium education. Differences in employment attachment — such as non-employment and part-time work — account for 30–60 percent of lifetime earnings dispersion, and are particularly important among the low educated. Weak employment attachment is a key driver of lifetime earnings inequality and is closely linked to exposure to adverse shocks such as unemployment and health-related events. Lifetime earnings inequality has risen across cohorts among the low educated, partly through growing dispersion in employment attachment. In moving from earnings to net-income, transfers account for roughly five times as much of the inequality reduction as taxes, but this equalizing effect has weakened over time. Our results highlight the role of employment dynamics and social insurance for lifetime inequality.

Suggested Citation

  • Jonas Maibom & Trine Schack & Rune Vejlin, 2026. "The Role of Employment and Redistribution for Lifetime Income Inequality in Denmark," CESifo Working Paper Series 13072, CESifo.
    • Handle: RePEc:ces:ceswps:_13072
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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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