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Does an Aging Population Increase Inequality?

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  • von Weizsäcker, Robert K

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 disentangle 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.

Suggested Citation

  • von Weizsäcker, Robert K, 1996. "Does an Aging Population Increase Inequality?," CEPR Discussion Papers 1322, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1322
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    More about this item

    Keywords

    Fiscal-demographic Policy Conflicts; Income Distribution; Population Aging; Social Policy Design;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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