Income Inequality and Redistribution Policies in Japan During the 1980s and 1990s

Abstract

We examine the long-term trend of income inequality and the effects of redistribution policies over the past two decades in Japan. The key findings are as follows. First, more than half of the widening inequality is attributable to population aging and declining household size. Notably, the increasing share of the elderly who reside apart from their children has raised income inequality in terms of pre-tax pre-transfer income. Second, the effects of redistribution policies were concentrated on reducing inequality among the elderly, but most of the inequality was caused by income transfers from the young, and withinage redistribution was generally limited. Third, the younger cohorts tend to face greater inequality of disposable income, suggesting that the redistribution policies have become less progressive on a lifetimeincome basis.