Life course perspective on economic shocks and income inequality through age-period-cohort analysis: evidence from Finland

Esa Karonen & Mikko Niemelä


Utilizing age-period-cohort analysis, this paper examines the development of income distribution across periodic economic fluctuations in relation to cohorts and age groups. Empirical analysis is based on the Finnish Income Distribution Statistics and Expenditure Surveys covering the period of 1966-2015. The findings suggest that period and cohort effects can be identified as main effects on relative income, while age effects have no meaningful impact when control variables are taken into account. This reveals a connection between the effects of economic shocks and cohort placement on labour market entry. Additionally, absolute income analysis suggests that economic shocks create stagnation points in income development, which are especially detrimental to cohorts who are in the process of transitioning into labour markets. Additionally, our research illustrates how middle-income attainment has not changed due to periodic shocks; rather, it is related to intergenerational inequalities and relative income differences, where the baby boomer generation is a clear winner.

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