SFB 303 Discussion Paper No. A - 180
Author: Weizäcker, Robert K. von
Title: Demographic Change and Income Distribution
Abstract: Starting from a simple, descriptive life-cycle model of individual income, an explicit link between the age
composition of a population and the personal distribution of incomes is established. Demographic effects on
income inequality are derived. Next, two income maintenance programs are introduced: a redistributive tax-
transfer scheme and a pay-as-you-go financed state pension system. The resulting government budget constraints
entail interrelations between fiscal and demographic variables, causing an additional, indirect demographic
impact on the distribution. This is shown not only to change, but in some cases even to reverse the distributional
incidence of demographic trends. Several policy conflicts arise.
Creation-Date: August 1988
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