Published in
NHH Discussion Paper series 6, 2010
Abstract
We demonstrate how age-adjusted inequality measures can be used to evaluate whether changes in inequality over time are because of changes in the age structure. In particular, we explore the hypothesis that the substantial rise in earnings inequality since the early 1980s is driven by the large baby boom cohorts approaching the peak of the age-earnings profile. Using administrative data on earnings for every Norwegian male over the period 1967-2004, we find that the impact of age adjustments on the trend in inequality is highly sensitive to the method used: while the most widely used age-adjusted inequality measure indicates that the rise in inequality in the 1980s and 1990s is indeed driven partly by the baby boom, a new and improved age-adjusted measure indicates the opposite, namely that the rise in inequality was even larger than what the inequality measures unadjusted for age reveal.