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Age structure and income distribution policy

Abstract

The dependence of earnings on age is a firmly established empirical fact. A simple microeconomic model of educational choice, being consistent with this observation, is designed. The model lends itself readily to aggregation over individuals and age groups. Thus, relations can be set up between economic variables influencing the aggregate distribution of labour incomes and demographic variables determining the age structure of the population. The main results of the present study are the following two:

  • Overall earnings inequality is shown to be an increasing function of life expectancy and a decreasing function of fertility.

  • The effectiveness of redistributive policies in sensitive to the age composition. In particular, the inequality-reducing effect of a one percent income tax rise is shown to be the smaller the older the population.

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This is a revised version of a paper presented at the First Annual Meeting of the European Society for Population Economics, Rotterdam, September 1987. I am especially indebted to Marc Nerlove, Urs Schweizer, and David Wildasin for very helpful comments. Financial support from Stiftung Volkswagenwerk and Deutsche Forschungsgemeinschaft is gratefully acknowledged.

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von Weizsäcker, R.K. Age structure and income distribution policy. J Popul Econ 1, 33–55 (1988). https://doi.org/10.1007/BF00171509

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  • DOI: https://doi.org/10.1007/BF00171509

Keywords

  • Life Expectancy
  • Demographic Variable
  • Income Distribution
  • Economic Variable
  • Labour Income