Aging and Wealth Inequality in a Neoclassical Growth Model
20 Pages Posted: 28 Mar 2016 Last revised: 24 Jul 2019
Date Written: 2016
In this article, the author uses a version of the neoclassical growth model with overlapping generations of individuals to investigate the effect of aging on wealth inequality. When an economyâ€™s population becomes olderâ€”that is, when the proportion of individuals 65 years of age and older increasesâ€”two effects are at work: a direct effect from the changing age composition of the population and an indirect, equilibrium effect from the change in asset holdings by ownerâ€™s age. The main result is that wealth inequality in an aging population may decrease or increase depending on the cause of the aging. An increase in life expectancy tends to increase inequality, whereas a reduction in the population growth rate tends to reduce it.
JEL Classification: E1, E2, J1
Suggested Citation: Suggested Citation