Income Distribution: Demographic Aspects

Demographic variables can have important effects on the distribution of income. This article discusses effects on inequality of three demographic variables: (a) age structure; (b) marriage and household composition; and (c) differential fertility by income. Research in each area demonstrates the complex dynamics of demographic change and measures of dispersion, with few simple predictions coming out of either theoretical or empirical analysis. The effects of age structure include both within-cohort and between-cohort effects. Theoretical and empirical analysis suggest that population aging is associated with an increase in within-cohort inequality. The between-cohort component is less predictable, however, and may neutralize the effect of rising within-cohort inequality. Similar decompositions are important in understanding the role of marriage. Increasing correlations in spouses' earnings have had a disequalizing effect in the US in recent decades, but this has been offset by declining inequality in women's wages. These offsetting components lead to widely differing conclusions about the role of increasing women's labor supply on family income inequality. The effects on inequality of differential fertility across income classes depends on patterns in intergenerational mobility. Models combining population dynamics with economicñdemographic interactions have produced useful insights about the complex relationship between differential fertility and inequality.