Esa Karonen: Economic Inequality: The life course perspective over economic shocks. Presentation at Turku Center for Welfare Research 2.12.2016.

1. Economic Inequality: The life course
perspective over economic shocks
Esa Karonen & Mikko Niemelä
Tackling Inequalities
in Time of Austerity

2. Aims of the PhD study
Research topic Data
1
Income inequality between generations Income distribution statistics
1987-2014
Income and expenditure surveys
1966-1985
2 Wealth inequality between generations Households’ Wealth 1988-2013
3 Consumption inequality between generations Income and expenditure surveys
1966-2012
4
Benefit reforms and their effects on the income
inequality between generations
SISU-microsimulation data

3.  Life course perspective offers a great platform for
researching intergenerational changes (Karl Ulrich
Mayer)
 Birth-cohorts as research units and objects of research
 The effects of economic shocks as comparison point
 Offers the periodic perspective and the association
between incomes and birth-cohorts
Literature review

4.  Adequate range of data (mainly income)
 Adequate range of statistical years in data (short time
series)
 Age-period-cohorts –design
A prior research lacks

5.  Research questions
 How birth-cohort’s income trajectories differ from each other?
 What are the effects of economic shocks over different birth-
cohorts?
 Economic shocks
 1940 2nd World War
 1973 oil crisis
 1993 ”the great depression”
 2007/8 financial crisis
Research questions

6.  Two cross-sectional datasets
 Income Distribution Statistics, 1987-2014
 Income and expenditure survey, Consumption, 1966-1985
Data

7.  Dependent variables: Disposable household income (equivalent
& inflation adjusted)
 Independent variables: GDP, employment level, education, SES
 Cohort design:
 Birth-cohorts with 5 year intervals
 ”Crisis cohorts” – two different generations
 25-30 year olds at the time of economic shock
 40-45 year olds at the time of economic shock
 Used statistical models:
 APC-model, D-variant (age-period-cohort “detrend” -variant)
 Foster-Greer-Thorbecke poverty indexes
Variables & models

8. APC –model in a nutshell

9. Some technical Greek moonrunes

10. Results
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
1966
1971
1976
1981
1985
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
FGT a=0, headcount index
0
0.02
0.04
0.06
0.08
0.1
0.12
1966
1971
1976
1981
1985
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
FGT a=1, normalized poverty index
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
1966
1971
1976
1981
1985
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
FGT a=2, squared poverty index
WW2 - 25-30yrs - 1915-1920
Oil crisis - 25-30yrs - 1948-1953
90´s depression - 25-30yrs - 1965-1970
Financial crisis - 25-30yrs - 1985-1990
Oil crisis - 40-45yrs - 1933-1937
90's depression - 40-45yrs - 1950-1955
Financial crisis - 40-45yrs - 1967-1972

11.  Dependent variable: centered (period level) logarithmic disposable income
 Control variables: Education, SES, size of household, unenployment
 Used weight: (weight*n members in household)
Results
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
APC-D Cohort estimates, linear regression (hysteresis adjusted)

12.  International
comparing points
 Scale is same as in
Norway
 In the cases of
Norway and France
the APC-D estimates
have similar shape as
Finland
Results

13. -0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
APC-D Cohort estimates, logistic model (hysteresis adjusted)
 Dependent variable: middle income ”membership”
 Disposable income in quitiles (1-2 = 0; 3-5 = 1)
 No control variables included (saved processing time)
Results

14.  Again, international
comparing points
 Scale is more
aggressive than in
Norway
 Reason: upper-
middle class
 Norway has the same
trajectory, although,
younger cohorts
have recovered
Results

15.  Youngest cohort at the risk of income stagnation…or not?
 Income developement peak at the cohorts born in 1930-40
and the middle income attainment at 1945-1950?
 Financial crisis affects risk of poverty more heavily for
those who are entering to the job market than older
cohorts in more stable life cycle
Conclusion

16. THANK YOU!

17. Consortium partners of TITA project