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Redistribution and insurance in the German welfare state

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  • Bartels, Charlotte

Abstract

Welfare states redistribute both between individuals (inter-individual redistribution) reducing annual, cross-sectional inequality and over the lifecycle of an individual (intra-individual redistribution) insuring individuals against income risks in the long-term. But studies measuring redistribution often focus on a one-year period and the second aspect is neglected. To quantify both inter- and intra-individual redistribution in Germany this study uses SOEP data from 1984 to 2009 to construct long-term incomes over a 20-year period. Results show that annual, cross-sectional inequality is higher than inequality in the long-run, but the effect of redistribution is also larger annually than in the long-term. Depending on age the distributional focus of the German welfare state differs. When persons are young, state intervention reduces income differences between individuals mainly through the progressive tax system. Getting older and reaching retirement age income-smoothing redistribution via social security pensions becomes central. --

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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2011/25.

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Date of creation: 2011
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Handle: RePEc:zbw:fubsbe:201125

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Keywords: long-term income inequality; income redistribution; social security;

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References

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Cited by:
  1. Bartels, Charlotte, 2012. "Long-term participation tax rates," Discussion Papers 2012/20, Free University Berlin, School of Business & Economics.
  2. Mike Brewer & Monica Costa Dias & Jonathan Shaw, 2012. "Lifetime inequality and redistribution," IFS Working Papers, Institute for Fiscal Studies W12/23, Institute for Fiscal Studies.

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