ANR LELI
Life Events and Lifetime Inequality (LELI)
ANR JCJC Research grant
Principal Investigator of LELI research projet
Summary of the project
The economic literature has extensively studied income inequality, yielding significant insights into its scale, evolution, and determinants. However, there’s been relatively less focus on lifetime income inequality, which examines income disparities over individuals’ lifetimes rather than at a single point in time. The LELI project research proposal seeks to investigate how lifetime inequality can be shaped by life-changing adverse events that affect individuals’ income trajectories and accumulates over individuals’ life courses.
The project combines rich longitudinal administrative data from France and the Netherlands with advanced econometric methods to answer four key questions: i) how do life events affect individuals’ income trajectories ? ii) what is the buffering role played by public policies, and in particular the tax-and-transfers system ? iii) how do life events correlate and cumulate over the life-cycle and translate into lifetime inequality and iv) how do the consequences of life events differ between two different institutional contexts, namely those of France and the Netherlands.
Those research questions are tackled in three work packages (WP).
WP1, studies the effect of various life-events on income trajectories using Dutch data. WP1.1 aims to construct a large dataset of demographic, employment, or health related events. In WP1.2, we estimate the causal effect of events on income trajectories and assess how much individuals are protected against those events through family insurance and public insurance. We then focus on dimensions that have not yet been extensively studied in the literature, namely the role played by spousal alimony on the effect of divorce (WP1.3) and the effect of child health shock (WP1.4).
WP2 studies the correlations between different events and their implication for lifetime inequality. In WP2.1, we use the event dataset constructed in WP1 to describe the correlation of events over the life-cycle using sequence analysis. The correlation of events also has implications regarding lifetime inequality, as the repetition of adverse events over the life cycle is likely to generate divergent income trajectories between individuals. In WP2.2, we estimate a model of earning dynamics that incorporates the effect of correlated events. The model allows for counterfactual simulations of earning trajectories that help understanding the importance of events and correlation between them to explain features of lifetime income distribution and more broadly to understand the role of these shocks in terms of lifetime inequality.
In WP3, we replicate some of the results obtained in the Dutch context (WP1 and WP2) in the context of France. We use as much as possible similar data and empirical strategies, to be able to draw conclusions on the importance of context regarding the incidence and effect of events. In WP3.1, we construct an event data for France, and compare it to the one constructed in WP1.1 to study the incidence of events, and their correlation over time. In WP3.2 we compare the effect of life events in both countries, focusing on how the differences in the tax-and-transfer systems lead to differences in the degree of insurance provided for each type of event. In WP3.3 we compare the difference in earnings profiles and associated lifetime inequality.
The LELI project is built to make significant contributions to understanding how adverse life events shape economic trajectories and income inequality. Through scientific dissemination efforts, including research papers, scientific events, and adherence to Open Science principles, the project aims to make significant scientific academic contributions with large outreach. Furthermore, by engaging policy-makers in conferences and disseminating results through policy papers and public discussions, the project seeks to have a tangible impact on policy-making and societal understanding of income dynamics and inequality.