Unlocking the inverted-U: exploring the threshold impact of population aging on income inequality dynamics
DOI: https://doi.org/10.3846/tede.2025.23762Abstract
As population aging unfolds at an unprecedented scale worldwide, its impact on income inequality continues to be contentious, with no clear consensus in the literature. Rather than viewing the aging-inequality linkage as solely positive or negative, this paper introduces a modified life cycle with precautionary behavior, indicating that inequality may initially worsen with aging before stabilizing at later stages. The Dynamic Panel Threshold Kink (DPTK) regression method is used to identify the threshold point of aging intensity at which the inequality begins to moderate following a period of intensification. The findings reveal a threshold aging intensity of 1.4%, which supports an inverted-U characterization of the aging-inequality nexus. The results suggest that liberalizing trade and improving government redistribution can assist countries experiencing a rise in inequality. At the same time, the prevalence of precautionary effects due to population aging may offer a natural defense against the detrimental effects of inequality over time.
First published online 05 June 2025
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income inequality, population aging, panel data, kink threshold regressionHow to Cite
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Copyright (c) 2025 The Author(s). Published by Vilnius Gediminas Technical University.
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