Working Paper: CEPR ID: DP8393
Authors: Ingvild Almas; Tarjei Havnes; Magne Mogstad
Abstract: In this paper, we demonstrate how age-adjusted inequality measures can be used to evaluate whether changes in inequality over time are due to changes in the age-structure. To this end, we use administrative data on earnings for every male Norwegian over the period 1967-2000. We find that the substantial rise in earnings inequality over the 1980s and into the early 1990s, is to some extent driven by the fact that the large baby boom cohorts are approaching the peak of the age-earnings profile. We further demonstrate that the impact of age-adjustments on the trend in inequality during the period 1993-2000 is highly sensitive to the method used: While the most widely used age-adjusted inequality measure indicates little change in inequality over this period, a new and improved age-adjusted measure suggest a decline in inequality.
Keywords: age structure; age-earnings profile; Gini coefficient; inequality trend
JEL Codes: D31; D63; D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Demographic changes (J11) | earnings inequality (D31) |
| Baby boom cohorts reaching peak age-earnings profile (J26) | earnings inequality (D31) |
| Age-earnings relationship (J31) | earnings inequality (D31) |
| Age adjustments (J14) | trend in earnings inequality (D31) |
| Age structure (J11) | trend in earnings inequality (D31) |