Skip to main content

Advertisement

SpringerLink
Log in

Population aging and wealth inequality

  • Published:
Economic Change and Restructuring Aims and scope Submit manuscript

Abstract

Much effort has been devoted to exploring the consequence of population aging on economic growth. Little attention is paid to its impact on income and wealth inequality. This is critical because inequality matters for the distribution of economic resources and social welfare and is interlinked to economic growth. To fill the void, this paper evaluates whether population aging affects inequality, with special emphasis on wealth inequality and nonlinearity. In a cross-country panel data setting, it finds that top wealth shares follow a U path, i.e., decrease and then increase, in the process of population aging. By contrast, the bottom wealth shares have an inverted-U pattern, i.e., rise and then fall, when a population ages. Similar results are reached for the income share. The data thus suggest that there exists some threshold level of population aging such that any deviations from that level will widen the gap between the wealthy and the poor and increase disparities in wealth and income inequality.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Data availability

Data are available upon request.

Notes

  1. Our dataset is available upon request. As for the STATA codes for GMM and GMM quantile estimation procedures as well as panel VAR causality tests, please type “help xtabond2”, “help qregpd”, and “help pvar” in STATA.

  2. Political stability measures the likelihood of political instability and/or politically motivated violence, including terrorism. Control of corruption measures the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as capture of the state by elites and private interests.

  3. The marginal effects and standard errors are calculated through the delta method, based on the sample mean of variables in the regression.

References

  • Abrigo MR, Love I (2016) Estimation of panel vector autoregression in Stata. Stand Genom Sci 16:778–804

    Google Scholar 

  • Acemoglu D, Restrepo P (2017) Secular stagnation? the effect of ageing on economic growth in the age of automation. Am Econ Rev 107:174–179

    Article  Google Scholar 

  • Acemoglu D, Restrepo P (2022) Demographics and automation. Rev Econ Stud 89:1–44

    Article  Google Scholar 

  • Aksoy Y, Basso HS, Smith RP, Grasl T (2019) Demographic structure and macroeconomic trends. Am Econ J Macroecon 11:193–222

    Article  Google Scholar 

  • Alesina A, Rodrik D (1994) Distributive politics and economic growth. Q J Econ 109:465–490

    Article  Google Scholar 

  • Anderson E, Jalles D’Orey MA, Duvendack M, Esposito L (2017) Does government spending affect income inequality? a meta-regression analysis. J Econ Surv 31:961–987

    Article  Google Scholar 

  • Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-component models. J Econ 68:29–52

    Article  Google Scholar 

  • Bagchi S, Svejnar J (2015) Does wealth inequality matter for growth? the effect of billionaire wealth, income distribution, and poverty. J Comp Econ 43:505–530

    Article  Google Scholar 

  • Barrett G, Crossley F, Worswick C (2000) Demographic trends and consumption inequality in Australia between 1975 and 1993. Rev Income Wealth 46:437–456

    Article  Google Scholar 

  • Barro RJ (2000) Inequality and growth in a panel of countries. J Econ Growth 5:5–32

    Article  Google Scholar 

  • Basso HS, Jimeno JF (2021) From secular stagnation to robocalypse? implications of demographic and technological changes. J Monet Econ 117:833–847

    Article  Google Scholar 

  • Berisha E, Meszaros J (2020) Macroeconomic determinants of wealth inequality dynamics. Econ Model 89:153–165

    Article  Google Scholar 

  • Bernheim BD, Skinner J, Weinberg S (2001) What accounts for the variation in retirement wealth among US households? Am Econ Rev 91:832–857

    Article  Google Scholar 

  • Biewen M, Juhasz A (2012) Understanding rising income inequality in Germany, 1999/2000–2005/2006. Rev Income Wealth 58:622–647

    Article  Google Scholar 

  • Bishop J, Formby J, Smith W (1997) Demographic change and income inequality in the United States, 1976–1989. South Econ J 64:34–44

    Google Scholar 

  • Bloom DE, Canning D, Fink G, Finlay JE (2009) Fertility, female labor force participation, and the demographic dividend. J Econ Growth 14:79–101

    Article  Google Scholar 

  • Bloom DE, Canning D, Fink G (2010) Implications of population ageing for economic growth. Oxf Rev Econ Policy 26:583–612

    Article  Google Scholar 

  • Bloom DE and Luca DL (2016). The global demography of aging: facts, explanations, future. In Handbook of the economics of population aging (Vol. 1, pp. 3–56). North-Holland

  • Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econ 87:115–143

    Article  Google Scholar 

  • Cameron LA (2000) Poverty and inequality in Java: examining the impact of the changing age, educational and industrial structure. J Dev Econ 62:149–180

    Article  Google Scholar 

  • Chen X, Huang B, Li S (2018) Population ageing and inequality: evidence from China. World Econ 41:1976–2000

    Article  Google Scholar 

  • Claessens S, Perotti E (2007) Finance and inequality: channels and evidence. J Comp Econ 35:748–773

    Article  Google Scholar 

  • Cohen A, Dehejia R, Romanov D (2013) Financial incentives and fertility. Rev Econ Stat 95:1–20

    Article  Google Scholar 

  • Dabla-Norris ME, Kochhar MK, Suphaphiphat MN, Ricka MF, Tsounta ME (2015) Causes and consequences of income inequality: a global perspective. International Monetary Fund

    Google Scholar 

  • De Nardi M (2004) Wealth inequality and intergenerational links. Rev Econ Stud 71:743–768

    Article  Google Scholar 

  • De Nardi M, Fella G (2017) Saving and wealth inequality. Rev Econ Dyn 26:280–300

    Article  Google Scholar 

  • De Nardi M, French E, Jones JB (2010) Why do the elderly save? the role of medical expenses. J Polit Econ 118:39–75

    Article  Google Scholar 

  • de Vaal A, Ebben W (2011) Institutions and the relation between corruption and economic growth. Rev Dev Econ 15:108–123

    Article  Google Scholar 

  • Deaton AS (1991) Saving and liquidity constraints. Econometrica 59:1221–1248

    Article  Google Scholar 

  • Deaton AS, Paxson CH (1994) Intertemporal choice and inequality. J Polit Econ 102:437–467

    Article  Google Scholar 

  • Deaton AS, Gourinchas PO, and Paxson C (2002) Social security and inequality over the life cycle. In: The distributional aspects of social security and social security reform (pp. 115–148). University of Chicago Press

  • Easterly W, Fischer S (2001) Inflation and the poor. J Money Credit Bank 33:160–178

    Article  Google Scholar 

  • Galor O, Tsiddon D (1997) Technological progress, mobility, and economic growth. Am Econ Rev 87:363–382

    Google Scholar 

  • Greenwood J, Jovanovic B (1990) Financial development, growth, and the distribution of income. J Polit Econ 98:1076–1107

    Article  Google Scholar 

  • Gupta S, Davoodi H, Alonso-Terme R (2002) Does corruption affect income inequality and poverty? Econ Gov 3:23–45

    Article  Google Scholar 

  • Haan P, Wrohlich K (2011) Can child care policy encourage employment and fertility?: evidence from a structural model. Labor Econ 18:498–512

    Article  Google Scholar 

  • Hasan I, Horvath R, Mares J (2020) Finance and wealth inequality. J Int Money Financ 108:102161

    Article  Google Scholar 

  • Henretta JC, Campbell RT (1976) Status attainment and status maintenance: a study of stratification in old age. Am Sociol Rev 41:981–992

    Article  Google Scholar 

  • Jantti M (1997) Inequality in five countries in the 1980s: the role of demographic shifts, markets and government policies. Economica 64:415–440

    Article  Google Scholar 

  • Jones CI (2015) Pareto and Piketty: the macroeconomics of top income and wealth inequality. J Econ Perspect 29:29–46

    Article  Google Scholar 

  • Lloyd-Ellis H, Bernhardt D (2000) Enterprise, inequality and economic development. Rev Econ Stud 67:147–168

    Article  Google Scholar 

  • Modigliani F (1966) The life cycle hypothesis of saving, the demand for wealth and the supply of capital. Soc Res 33:160–217

    Google Scholar 

  • Perotti R (1996) Growth, income distribution, and democracy: what the data say. J Econ Growth 1:149–187

    Article  Google Scholar 

  • Powell D (2022) Quantile regression with nonadditive fixed effects. Empir Econ 63:1–17

    Article  Google Scholar 

  • Prus SG (2000) Income inequality as a Canadian cohort ages: An analysis of the later life course. Res Aging 22:211–237

    Article  Google Scholar 

  • Quadrini V (1999) The importance of entrepreneurship for wealth concentration and mobility. Rev Income Wealth 45:1–19

    Article  Google Scholar 

  • Razin A, Sadka E, Swagel P (2002) The aging population and the size of the welfare state. J Polit Econ 110:900–918

    Article  Google Scholar 

  • Reinsdorf MB, Perozek M (2004) Alternative measures of personal saving. Surv Curr Bus 84:17–27

    Google Scholar 

  • Venti SF, Wise DA (1998) The cause of wealth dispersion at retirement: choice or chance? Am Econ Rev 88:185–191

    Google Scholar 

Download references

Funding

No.

Author information

Authors and Affiliations

  1. Department of International Business, Tamkang University, 151 Yingzhuan Road, Tamsui District, New Taipei City, 251301, Taiwan

    Joyce Hsieh

Authors
  1. Joyce Hsieh
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Joyce Hsieh.

Ethics declarations

Conflicts of interest

The author Joyce Hsieh declares that there’s no relevant or material financial interests that relate to the research described in this paper.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

See Tables

Table 7 A list of countries
Full size table

7,

Table 8 Descriptive Statistics
Full size table

8,

Table 9 Panel VAR-Granger causality Wald tests in a bivariate system
Full size table

9.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Hsieh, J. Population aging and wealth inequality. Econ Change Restruct 56, 4223–4252 (2023). https://doi.org/10.1007/s10644-023-09551-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10644-023-09551-3

Keywords

JEL Classification

Search

Navigation