Income Redistribution within the Life Cycle versus between Individuals: Empirical Evidence Using Swedish Panel Data
AbstractThe generalised entropy measure is applied to decompose overall income inequality over several years into one part showing inequality of long-run (permanent) income and one part showing variability of single individuals' incomes over time. By comparing these components of inequality for pre- and post-tax and benefit incomes, we get an estimate of how the welfare state affects two conceptually different components of income inequality. Using Swedish panel data covering 18 years, we find that income taxes primarily affect the distribution of long-run income. Although the main effecty of benefits is on smoothing intertemporal income variability, we also find an equalising impact on long-run income of benefits. Income variability is highest among those with low long-run income and the equalising effect of taxes and transfers within the life cycle is also largest in this group.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 197.
Length: 27 pages
Date of creation: 29 Sep 1997
Date of revision:
Publication status: Forthcoming in New Economics of Rising Inequalities, Cohen, David, Piketty, Thomas, Saint-Paul, Gille (eds.), 2001, Oxford University Press, CEPR.
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More information through EDIRC
Generalised entropy; income inequality; income mobility; income taxes;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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