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Income dynamics and the life cycle

Rigg, John A. and Sefton, Tom (2004) Income dynamics and the life cycle. CASEpaper, CASE/81. Centre for Analysis of Social Exclusion, London School of Economics and Political Science, London, UK.

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Abstract

This paper argues that our understanding of income and poverty dynamics benefits from taking a life cycle perspective. A person¿s age and family circumstances ¿ the factors that shape their life cycle ¿ affect the likelihood of experiencing key life events, such as partnership formation, having children, or retirement; this in turn affects their probability of experiencing rising, falling, or other income trajectories. Using ten waves of the British Household Panel Survey, we analyse the income trajectories of people at different stages in their lives in order to build a picture of income dynamics over the whole life cycle. We find that particular life events are closely associated with either rising or falling trajectories, but that there is considerable heterogeneity in income trajectories following these different events. Typically, individuals experiencing one of these life events are around twice as likely to experience a particular income trajectory, but most individuals will not follow the trajectory most commonly associated with that life event. This work improves our understanding of the financial impact of different life events and provides an indication of how effectively the welfare state cushions people against the potentially adverse impact of certain events.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk/case
Additional Information: © 2004 John Rigg and Tom Sefton
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Journal of Economic Literature Classification System: I - Health, Education, and Welfare > I3 - Welfare and Poverty > I32 - Measurement and Analysis of Poverty
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Research centres and groups > Centre for Analysis of Social Exclusion (CASE)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: CASE/81
Date Deposited: 02 Jul 2008 09:34
URL: http://eprints.lse.ac.uk/6310/

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