Older or Wealthier? The Impact of Age Adjustments on Wealth Inequality Ranking of Countries
By Ingvild Almås and Magne Mogstad
The Scandinavian Journal of Economics, Dec 2012, 114 (1), pages 24 - 54
Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross-sectional data, a concern is that older is confused with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates wealth inequality due to age, yet preserves inequality arising from other factors. Using a new cross-country comparable database, we examine the impact of age adjustments on wealth inequality across countries and over time. We find that the most widely used method yields a substantially different picture of age-adjusted wealth inequality than our method.