In our previous work, Deaton and Paxson (1994, 1997), we showed that, in a large group of countries, inequality in consumption increases with age within cohorts of individuals. This finding was motivated by a well-known feature of standard autarkic intertemporal choice models, that under appropriate assumptions consumption follows a martingale (see Robert E. Hall, 1978). The theory implies that within-cohort consumption inequality should rise over time as cohorts age, provided that shocks to consumption are not perfectly correlated across individuals. The same should be true of income, at least up to the date of retirement, and of earnings, if employers pay workers their expected marginal product (see Henry S. Farber and Robert Gibbons, 1996).

More recently we have examined whether inequality in health status also increases with age, and how the joint distribution of health and income evolve over the life cycle. It is plausible that health shocks have both permanent and transitory components. The presence of the former implies that health status will be nonstationary so that, provided health shocks are not perfectly correlated across individuals, the dispersion of health status will grow with age. This view of health status as a nonstationary random variable is consistent with stress models in which poor health is the result of" the piling up of adverse life experiences"(Carol D. Ryff and Burton Singer, 1997 p. 90).