Age structure and income distribution policy

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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.

Original languageEnglish
Pages (from-to)33-55
Number of pages23
JournalJournal of Population Economics
Volume1
Issue number1
DOIs
StatePublished - Jun 1988
Externally publishedYes

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