Scandinavian Working Papers in Economics
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Department of Economics, Norwegian School of Economics (NHH) Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)

No 9/2010:
Older or Wealthier? The Impact of Age Adjustment on Cross-Sectional Inequality Measures.

Ingvild Almås () and Magne Mogstad ()

Abstract: Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross-section data, a concern is that one confuses older with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates wealth inequality due to age, yet preserves inequality arising from other factors. Using a new cross-country comparable database, we examine the impact of age adjustments on wealth inequality across countries and over time. We find that the most widely used method yield a substantially different picture of age adjusted wealth inequality than our method.

Keywords: Wealth inequality; Life cycle; Age adjustments; Gini coefficient.; (follow links to similar papers)

JEL-Codes: D31; D63; D91; E21; (follow links to similar papers)

55 pages, March 9, 2010

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