6533b7d8fe1ef96bd126acaa
RESEARCH PRODUCT
PERMANENT INCOME, CONVERGENCE AND INEQUALITY AMONG COUNTRIES
Lorenzo SerranoJosé Manuel Pastorsubject
Net national incomeEconomics and EconometricsLabour economicsIncome inequality metricsIncome distributionPermanent income hypothesisEconomicsDemographic economicsPer capita incomeAdjusted gross incomeIncome elasticity of demandPassive incomedescription
The literature on inequality has generally focused on the analysis of annual per capita income. This paper adopts a different approach by considering the life-cycle dimension of inequality and convergence between economies from 1960 to 2000. We analyze the present value of the set of incomes individuals obtain throughout their whole life (permanent income). On the basis of this approach, various simulations are made to determine the effect on inequality in permanent income of variables such as survival rates and the long-run growth rates in current income. The results indicate that survival rates are an important source of inequality. Inequality in permanent income is about one third higher than in current income. The implication of this finding is that if the whole life-cycle dimension is not considered, the level of inequality among economies is being underestimated.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2008-03-01 | Review of Income and Wealth |