Demographic transition and the rise of wealth inequality

Abstract We analyse the contribution of rising longevity to the increase in wealth inequality in the U.S. over the past seventy years. To do so, we construct an overlapping generations (OLG) model with multiple sources of inequality, carefully calibrated to the data. Our key finding is that improvements in old-age longevity have a substantial impact on wealth inequality, accounting for approximately half the effect of income inequality, which has been the focus of much of the existing literature. In contrast, the impact of tax changes is relatively minor. The contribution of rising longevity is expected to continue driving wealth inequality upward in the coming decades.