Intergenerational inequality and the intergenerational state

Abstract

Inequality between generations is a central feature of human societies. Moreover, within human societies many institutions have developed that mould and shape intergenerational inequality, including the state. Nevertheless, intergenerational inequality has typically been only loosely defined as a concept. This article examines intergenerational inequality in income, as well as how the state works to alter intergenerational inequality in income through the redistributive effect of public transfers. In order to provide greater definition to the concept of intergenerational inequality, the article introduces a new measure of intergenerational inequality: the IGI index. Building on this index, the article also constructs a new measure of the redistributive effect of public transfers on intergenerational inequality. With these new measures added to its methodological toolkit, the article presents new evidence on the incomes and public transfers paid and received by different ages and generations. This evidence is drawn from the recently developed Australian National Transfer Accounts, which include data on incomes and public transfers in Australia during the 28-year time period between 1981–82 and 2009–10. The analyses presented suggest that there are substantial inequalities in the incomes received by different generations, with earlier generations generally receiving less income in real terms over their lifetimes than later generations. As the state has operated through time—receiving taxes and other public transfers from some individuals and paying social protection and other public transfers to others—it has mostly favoured later generations more than earlier generations. In doing so, it has mostly worked to increase intergenerational inequality.