Inequality in an Equal Society: Theory and Evidence

Jochen Mierau and James Rockey

No 15/23, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: We consider empirically the degree of wealth and income inequality that would prevail in a society in which, other than differences in age, everyone was equal. Theory suggests that life-cycle factors will still lead to substantial ‘natural’ inequality. Analysing cross-national data from the recently collected National Transfer Accounts we find that societies with no other source of inequality will exhibit substantial concentrations of income and wealth – Gini coefficients of circa 0.45 are common for income, purely due to these life-cycle effects. Using a modified Gini coefficient we find a substantial fraction of extant inequality can be attributed to this natural inequality. Finally, we show that if relative cohort sizes were equal to their long run values inequality would increase further.

Keywords: Income Inequality; Wealth Inequality; National Transfer Accounts. (search for similar items in EconPapers)
JEL-codes: D31 J10 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-gro
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