Bounding Lifetime Income Using a Cross Section of Data

Measures of income inequality based on current income are well known to overstate lifetime income inequality for two reasons: intracohort mobility and the shape of the age-earnings profile. Utilizing the concept of age equivalence scales along with varying assumptions concerning the extent of intracohort mobility, the method presented bounds lifetime income inequality using only cross-sectional data from the CPS, 1967-86. As a result, we are able to analyze changes in lifetime inequality over this period