Two Views of Inequality Over the Life-Cycle

Jonathan Heathcote (), Kjetil Storesletten () and Giovanni Luca Violante ()

No 4728, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Data on the life-cycle profiles of inequality in wages, earnings, hours worked and consumption contains precious information for answering questions about the ability of households to insure labor market risk and about the sources of this risk. This Paper demonstrates that the choice of whether to control for cohort effects or for time effects has a drastic impact on the estimated age profiles for inequality and, thus, on the answers to those questions. It also shows that time effects are required to account for the observed trends in inequality in thirty years of US data, whereas there is no evidence that cohort effects have been important.

Keywords: cohort effects; consumption inequality; labour supply; wage inequality (search for similar items in EconPapers)
JEL-codes: C13 D31 D91 J22 J31 (search for similar items in EconPapers)
Date: 2004-11

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Journal Article: Two Views of Inequality Over the Life Cycle (2005)
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