SFB 303 Discussion Paper No. A - 494
Author: Weizsäcker, Robert K. von
Title: Does an Aging Population Increase Inequality?
Abstract: The paper reviews recent research on the impact of an aging population
on the distribution of income. After briefly discussing the demographic
conditions responsible for population aging, a short account is given of
demographic trends in the industrialized world. In order to disentangel the
many potential channels by which an aging society affects the dispersion of
income, several levels of aggregation are distinguished. The paper
differentiates between intra- and intergenerational issues, between direct
and indirect demographic inequality effects, and between the distribution of
current and lifetime income. It emphasizes the critical role of age-related
redistributive tax-transfer systems, like public pension schemes and health
care systems. Sources of distributional policy conflicts are identified at
both the cross-section level and the lifetime level of income inequality.
The institutional design of intergenerational burden sharing, individual
disincentive reactions, shifts in age-income profiles related to cohort
size, and politico-economic repercussions are shown to drive the relation
between population aging and income distribution in distinct and partially
opposite ways.
Keywords: Income Distribution; Population aging; Fiscal-demographic policy
conflicts; Social policy design
JEL-Classification-Number: D31, H55, J18
Creation-Date: October 1996
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