Older or Wealthier?: The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries

Ingvild Almas and Magne Mogstady

No 181, SOEPpapers from DIW Berlin, The German Socio-Economic Panel (SOEP)

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, we may confuse older with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates transitory wealth inequality due to age, yet preserves inequality arising from other factors. This new method is superior to existing methods, like the much used Paglin-Gini, which is shown to have several problems. A new cross-country comparable database reveals that the choice of method is empirically important: Existing methods yield erroneous wealth inequality rankings of countries.

Keywords: Wealth inequality; Life cycle; Age adjustments; Gini coefficient (search for similar items in EconPapers)
JEL-codes: D31 D63 D91 E21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hap and nep-ltv
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp181

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