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

Magne Mogstad and Ingvild Almås (ingvild.almas@nhh.no)

No 9, LWS Working papers from LIS Cross-National Data Center in Luxembourg

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)
Pages: 38 pages
Date: 2009-04
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Published in The Scandinavian Journal of Economics 114, no. 1 (2012): 24-54

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Working Paper: Older or Wealthier? The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries (2009)
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