Adjusting for Age Effects in Cross-Sectional Distributions

Abstract

Income and wealth differ over the life cycle. In cross-sectional distributions of income or wealth, classical inequality measures such as the Gini could therefore find substantial inequality even if everyone has the same lifetime income or wealth. We describe the adjusted Gini index (Almås and Mogstad, 2012, Scandinavian Journal of Economics 114: 24–54), which is a generalization of the classical Gini index with attractive properties, and we describe the adgini command, which provides the adjusted Gini index and the classical Gini index. The adgini command also provides options to produce other well-known age-adjusted inequality measures, such as the Paglin–Gini (Paglin, 1975, American Economic Review 65: 598–609) and the Wertz–Gini (Wertz, 1979, American Economic Review 69: 670–672), and provides efficient estimation of the classical Gini coefficient.