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Tax and Transfer System: Considerable Redistribution Mainly via Social Insurance

Author

Listed:
  • Stefan Bach
  • Markus M. Grabka
  • Erik Tomasch

Abstract

Overall monetary redistribution via the tax and transfer system leads to net incomes being much more evenly distributed in Germany than market income. As a result, in 2011, the Gini coefficient decreased from 0.5 for market income to 0.29 for household disposable income. The social security system has a significant share in total income redistribution by the government, making up more than half of the inequality reduction. As far as there are equivalent insurance contributions for social security benefits, there is, however, no redistribution between individuals or generations over time. This shows that, in terms of how well public transfers are targeted, the most financially needy households are benefitting most from means-tested basic social security payments. Other public benefits such as the child benefit, however, are granted to all income groups. It was primarily the upper income brackets that benefitted from the now expired housing support for owner-occupiers (Eigenheimzulage).

Suggested Citation

  • Stefan Bach & Markus M. Grabka & Erik Tomasch, 2015. "Tax and Transfer System: Considerable Redistribution Mainly via Social Insurance," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 5(8), pages 103-111.
    • Handle: RePEc:diw:diwdeb:2015-8-1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.497268.de/diw_econ_bull_2015-08-1.pdf
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    Citations

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    Cited by:

    1. Carrillo-Tudela, Carlos & Launov, Andrey & Robin, Jean-Marc, 2021. "The fall in german unemployment: A flow analysis," European Economic Review, Elsevier, vol. 132(C).
    2. Tina Haussen, 2018. "Intra-Household Income Inequality and Preferences for Redistribution," Jena Economics Research Papers 2018-004, Friedrich-Schiller-University Jena.
    3. Tina Haussen, 2019. "Intra-household income inequality and preferences for redistribution," Review of Economics of the Household, Springer, vol. 17(2), pages 499-530, June.

    More about this item

    Keywords

    Redistribution of taxes and transfers; income distribution; SOEP;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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