A generative model for age and income distribution

TL;DR

This paper develops a generative model to describe the joint distribution of age and income in society, enabling better income forecasting and pension planning by capturing differences between UK and US populations.

Contribution

The study introduces a novel flexible calibration methodology for modeling age-income distributions using survey data, revealing stable joint distributions for UK and US populations.

Findings

Identified stable joint distributions of age and income for UK and US.

Demonstrated the model's utility for income forecasting.

Captured characteristic differences between UK and US populations.

Abstract

Each individual in society experiences an evolution of their income during their lifetime. Macroscopically, this dynamics creates a statistical relationship between age and income for each society. In this study, we investigate income distribution and its relationship with age and identify a stable joint distribution function for age and income within the United Kingdom and the United States. We demonstrate a flexible calibration methodology using panel and population surveys and capture the characteristic differences between the UK and the US populations. The model here presented can be utilised for forecasting income and planning pensions.