Open AccessIncome Dynamics and Life‐cycle Inequality: Mechanisms and Controversies
Author(s) -
Blundell Richard
Publication year - 2014
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/ecoj.12133
Subject(s) - economics , scope (computer science) , earnings , consumption (sociology) , business cycle , inequality , panel study of income dynamics , economic inequality , labour economics , macroeconomics , finance , mathematical analysis , mathematics , sociology , social science , computer science , programming language
This study focuses on the transmission of inequality over the working life. A model of constrained intertemporal choice is used to provide structure to the distributional dynamics of wages, earnings, income and consumption. The mechanisms used to insure labour market shocks are examined in a partial‐insurance setting where the manner and scope for insurance depends on the access to credit, the information available to consumers and the durability of income shocks. Drawing on recent research, family labour supply, the credit market and the tax system are all shown to play a key role. These mechanisms vary in importance across different points of the life cycle and the business cycle.