We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Inequality in current and lifetime income.
- Authors
Aaberge, Rolf; Mogstad, Magne
- Abstract
To gauge inequality in living standards, the distribution of lifetime income is likely to be more relevant than the distribution of current income. Yet, empirical studies of income inequality are typically based on observations of income for one or a few years. In this paper, we exploit a unique data set with nearly career-long income histories to assess the role of so-called life-cycle bias in empirical analysis of income inequality that uses current income variables as proxies for lifetime income. We find evidence of substantial life-cycle bias in estimates of inequality based on current income. One implication is that cross-sectional estimates of income inequality are likely to be sensitive to the age composition of the sample. A decomposition of the life-cycle bias into income mobility and heterogeneous profiles reveal the importance of two explanations that have been put forth to explain the disagreement between current and lifetime inequality.
- Subjects
EQUALITY; INCOME inequality; DISTRIBUTION (Economic theory); DEVELOPMENT gap; DISCRETIONARY income
- Publication
Social Choice & Welfare, 2015, Vol 44, Issue 2, p217
- ISSN
0176-1714
- Publication type
Article
- DOI
10.1007/s00355-014-0838-3