Does population aging coexist with income inequality in the long run? Evidence from selected Asia-Pacific countries

Abstract

Advanced countries have experienced a general rise in income inequality, whereas the outlook for income inequality in developing countries is mixed. As such, reduction in income inequality continues to be an important socio-economic development goal in many countries in the twenty-first century. Furthermore, it remains unclear whether the slow progress in reducing income inequality is a manifestation of the prevailing aging population. Using a sample of countries that are currently considered aging, aged, and super-aged countries in the Asia-Pacific region, the paper empirically examines whether a long-run nexus exists between population aging and income inequality. The methodology adopted includes the augmented autoregressive distributed lag (A-ARDL) bounds test. The key results show that aging and income inequality have a long-run relationship among aged and super-aged countries. In contrast, recently graying countries show no evidence of cointegration due to their relatively early transition to aging. Some other control variables also reveal a significant impact on income inequality. Increases in the real gross domestic product per capita worsen the income distribution, but higher government expenditure can help moderate income inequality. In light of rapid population aging, the findings are useful for policy makers in designing and targeting appropriate socioeconomic policies to help mitigate income inequality in the long run based on the intensity of the share of the elderly population in the countries studied.