POPULATION AGING AND CONSUMPTION INEQUALITY IN JAPAN

Abstract

This paper analyses how consumption inequality within a fixed cohort grows with age using Japanese household microdata. Following the method developed by Deaton and Paxson (1994), we obtain the following results. First, consumption inequality starts to increase at the age of 40. Second, younger generations face a more unequal distribution from the beginning of their life‐cycle. Third, half of the rapid increase in the economy‐wide consumption inequality during the 1980s was caused by population aging, while one‐third was due to the increasing cohort effect. The paper compares the above results with those of Deaton and Paxson.