How older people in the United States and Germany fared in the growth years of the 1980s: a cross-sectional versus a longitudinal view.

OBJECTIVES The goal of the study was to show that cross-sectional and longitudinal data yield dramatically different answers to a basic question: "How did older persons fare in the recovery years of the 1980s?" METHODS The United States Panel Study of Income Dynamics and the German Socio-Economic Panel are used cross-sectionally to capture changes in the economic well-being of older persons in the trough and peak years of the 1980s business cycle, and longitudinally to trace how the economic well-being of a given cohort of older persons changed over those years. Kernel density estimation is then used to show how the distribution of economic well-being of these populations changed over these years. RESULTS Cross-sectional comparisons confirm that persons aged 65 and over in the peak year were better off than persons aged 65 and over in the trough year in both countries. Longitudinal comparisons, however, show that persons aged 65 and over in the trough year who survived to the peak year received a substantially smaller share of the rewards of economic recovery than cross-sectional comparisons imply. Moreover, the entire income distribution of older persons in the United States shifted downwards. DISCUSSION Compositional changes in the cross-sectional data, caused by the entry of high-income persons who are young in the peak year but old in the trough year, obscure the decline in the economic well-being of the cohort of older persons who survived the trough year, in cross-sectional comparisons of older populations in the United States in the 1980s.