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Life Course Perspective on Economic Shocks and Income Inequality Through Age‐Period‐Cohort Analysis: Evidence From Finland
Author(s) -
Karonen Esa,
Niemelä Mikko
Publication year - 2020
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12409
Subject(s) - economics , cohort , cohort effect , demographic economics , economic inequality , income distribution , distribution (mathematics) , inequality , convergence (economics) , labour economics , economic growth , medicine , mathematics , mathematical analysis
Utilizing age‐period‐cohort analysis, this paper examines the development of income distribution across periodic economic fluctuations in relation to cohorts and age groups. The empirical analysis is based on the Finnish Income Distribution Statistics and Household Expenditure Surveys covering the period of 1966–2015. The findings suggest that the period and cohort effects can be identified as the main effects on relative income, while the age effects have no meaningful impact when the control variables are taken into account. This result reveals a connection between the effects of economic shocks and cohort placement on labor market entry. Additionally, absolute income analysis suggests that economic shocks create stagnation points in income development, which are especially detrimental to cohorts who are transitioning into labor markets. Additionally, middle‐income attainment has not changed due to periodic shocks but rather is related to inter‐cohort inequalities and relative income differences, where the baby boomer generation is a clear winner.