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Are People Inequality Averse, and Do They Prefer Redistribution by the State? : Evidence from German Longitudinal Data on Life Satisfaction ; A Revised Version

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Author Info
Johannes Schwarze
Marco Härpfer
Abstract

We link life-satisfaction data to inequality of the pre- and post-government income distribution at the regional level, to estimate the degree of inequality aversion. Three different inequality measures are used. In addition, we investigate whether a reduction in inequality by the state increases individual well-being. We find only weak evidence that Germans are inequality averse. Inequality reduction by the state does not increase well being. On the contrary, inequality reduction imposes an excess burden on middle-income earners. The paper uses data from the German Socio-economic Panel Study (GSOEP) from 1985 to 1998.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 407.

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Length: 23 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp407

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Related research
Keywords: Inequality aversion Redistribution Life satisfaction Panel data

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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  1. Giacomo Corneo & Hans Peter Gruner, 2000. "Social Limits to Redistribution," American Economic Review, American Economic Association, vol. 90(5), pages 1491-1507, December. [Downloadable!] (restricted)
  2. Alberto Alesina & Rafael Di Tella & Robert MacCulloch, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," Harvard Institute of Economic Research Working Papers 1938, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  3. Roland Bénabou & Efe A. Ok, 2001. "Social Mobility And The Demand For Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 447-487, May. [Downloadable!] (restricted)
    Other versions:
  4. Morawetz, David, 1977. "Income Distribution and Self-Rated Happiness: Some Empirical Evidence," Economic Journal, Royal Economic Society, vol. 87(347), pages 511-22, September. [Downloadable!] (restricted)
  5. Bruno Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  6. Hamermesh, Daniel S., 1999. "The Changing Distribution of Job Satisfaction," IZA Discussion Papers 42, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Johannes Schwarze, 2003. "Using Panel Data on Income Satisfaction to Estimate Equivalence Scale Elasticity," Review of Income and Wealth, Blackwell Publishing, vol. 49(3), pages 359-372, 09. [Downloadable!] (restricted)
  8. Bruno S. Frey & Alois Stutzer, 2000. "Maximising Happiness?," German Economic Review, Blackwell Publishing, vol. 1(2), pages 145-167, 05. [Downloadable!] (restricted)
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  9. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November. [Downloadable!] (restricted)
  10. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, Blackwell Publishing, vol. 34(2), pages 115-42, June.
  11. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May. [Downloadable!] (restricted)
  12. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March. [Downloadable!] (restricted)
  13. Thurow, Lester C, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, MIT Press, vol. 85(2), pages 327-36, May. [Downloadable!] (restricted)
  14. Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-57, Part I Se. [Downloadable!] (restricted)
  15. Sinn, Hans-Werner, 1995. " A Theory of the Welfare State," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(4), pages 495-526, December.
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  16. Corneo, Giacomo & Grüner, Hans Peter, 2001. "Individual Preferences for Political Redistribution," CEPR Discussion Papers 2694, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  17. Andrew Clark, 2003. "Inequality-Aversion and Income Mobility: A Direct Test," DELTA Working Papers 2003-11, DELTA (Ecole normale supérieure). [Downloadable!]
  18. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the US Have a European-Style Welfare System?," NBER Working Papers 8524, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Blackorby, Charles & Donaldson, David, 1978. "Measures of relative equality and their meaning in terms of social welfare," Journal of Economic Theory, Elsevier, vol. 18(1), pages 59-80, June. [Downloadable!] (restricted)
  20. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May. [Downloadable!] (restricted)
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