Understanding the trends in income, consumption and wealth inequality and how important are life-cycle effects?

Sommer, Mathias

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URL:	https://ub-madoc.bib.uni-mannheim.de/2057
URN:	urn:nbn:de:bsz:180-madoc-20577
Document Type:	Working paper
Year of publication:	2008
The title of a journal, publication series:	MEA Discussion Papers
Volume:	160
Place of publication:	Mannheim
Publication language:	English
Institution:	School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series:	Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject:	330 Economics
Subject headings (SWD):	Lebensstandard , Einkommensdisparität , Portfolio Selection , Einkommens- und Verbrauchsstichprobe , Deutschland
Keywords (English):	inequality , income , consumption , wealth , savings , portfolio choice , bequests
Abstract:	Rising inequality in income, wealth and consumption has received a good deal of public attention in the past years. At the same time, also macroeconomists are more and more interested in inequality as they have expanded their models to incorporate heterogeneity in the household sector. We supply these models with empirical benchmarks for their calibration and contribute to the understanding of the reasons underlying the trends in inequality. Specifically, we employ a variance decomposition and estimate life-cycle profiles of inequality in income, consumption and wealth based on two measures of inequality. We deepen the discussion on wealth inequality by evaluating the relative importance of savings, portfolio choice and inheritances for the accumulation of wealth. To do so, we project active and passive savings based on the observed saving and investment behavior of synthetic cohorts from the German Income and Expenditure Survey (EVS).