DISTRIBUTIVE IMPLICATIONS OF AN AGING SOCIETY

The paper reviews recent research on the impact of an aging population on the distribution of income. After briefly discussing the demograph ic conditions responsible for population aging, a short account is giv en of demographic trends in the industrialized world. In order to dise ntangle the many potential channels by which an aging society affects the dispersion of income, several levels of aggregation are distinguis hed. The paper differentiates between intra- and intergenerational iss ues, between direct and indirect demographic inequality effects, and b etween the distribution of current and lifetime income. It emphasizes the critical role of age-related redistributive tax-transfer systems, like public pension schemes and health care systems. Sources of distri butional policy conflicts are identified at both the cross-section lev el and the lifetime level of income inequality. The institutional desi gn of intergenerational burden sharing, individual disincentive reacti ons, shifts in age-income profiles related to cohort size, and politic o-economic repercussions are shown to drive the relation between popul ation aging and income distribution in distinct and partially opposite ways.