Aging and Wealth Inequality in a Neoclassical Growth Model

20 Pages Posted: 28 Mar 2016 Last revised: 24 Jul 2019

See all articles by Guillaume Vandenbroucke

Guillaume Vandenbroucke

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: 2016

Abstract

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 economy’s population becomes older—that is, when the proportion of individuals 65 years of age and older increases—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 owner’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

Vandenbroucke, Guillaume, Aging and Wealth Inequality in a Neoclassical Growth Model (2016). Review, Vol. 98, Issue 1, pp. 61-80, 2016. Available at SSRN: https://ssrn.com/abstract=2754973 or http://dx.doi.org/10.20955/r.2016.61-80

Guillaume Vandenbroucke (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

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