Two Views of Inequality Over the Life-Cycle
Minneapolis Fed; Georgetown University - Department of Economics
Stockholm University - Institute for International Economic Studies (IIES); University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)
New York University, Leonard N. Stern School of Business, Department of Economics; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. 4728
Data on the life-cycle profiles of inequality in wages, earnings, hours worked and consumption contains precious information for answering questions about the ability of households to insure labor market risk and about the sources of this risk. This Paper demonstrates that the choice of whether to control for cohort effects or for time effects has a drastic impact on the estimated age profiles for inequality and, thus, on the answers to those questions. It also shows that time effects are required to account for the observed trends in inequality in thirty years of US data, whereas there is no evidence that cohort effects have been important.
Number of Pages in PDF File: 14
Keywords: Wage inequality, consumption inequality, cohort effects, labor supply
JEL Classification: C13, D31, D91, J22, J31working papers series
Date posted: January 24, 2005
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