Inter-Individual Variation in Lifetime Accumulation of Income, Consumption, and Transfers in Aging Countries
Fanny Kluge, Max Planck Institute for Demographic Research
As individuals progress through the life cycle, they receive income and consume goods and services. Here, we examine two new aspects of such economic transfers. We use the trajectories of age-specific income, consumption, and deficit to compute individual lifetime accumulations of these quantities, and we recognize lifetime accumulation as a random variable, and focus on variation among individuals. Two individuals experiencing identical mortality risks and receiving income from the same age-specific distributions will differ in their lifetime accumulation because of the random outcome of those processes. To quantify this variation, we calculate the standard deviation, coefficient of variation, and skewness of lifetime accumulated transfers. We use the theory of Markov chains with rewards, applied to National Transfer Account estimates for Germany, and the German Income and Expenditure Survey (Einkommens- und Verbrauchsstichprobe, or EVS) of 1978, 1993, and 2003, and examine effects of education on the statistics of lifetime accumulation.