Life-Cycles in Income and Wealth
Using panel data for a sample of households in Utah from 1850 to 1900 we find income and wealth age profiles that are concave and that have a peak within the age distribution of the relevant sample. This finding holds for cross sections at five-year intervals, for pooled cross section time-series data, for cohort data, for households when individual differences are accounted for with a variance-components model and when we account for vintage measured as duration within the economy.We also find a relationship between age-income and age-wealth profiles that is consistent with a life-cycle model of consumption given a concave and peaked age-income profile: households accumulate and then begin to draw down wealth holdings, the age-wealth profile consistently peaks at an age later than the age-income profile for the same households, and the age-wealth profile for young households is considerably steeper than is the age-income profile.We have data, then, that in many respects appear to be capable of having been generated by individual decisions in a contemporary economy.This is particularly interesting since the data were, in fact, generated within a very different economy, one where formal education, on-the-job training and labor-leisure choices were probably considerably less important than in a contemporary economy.
JLE, Vol. 4, no. 3, part 2 (1986): S48-S79.