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On Measuring the Redistribution of Lifetime Income (1977)

In: Tackling Inequality

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  • Richard Layard

Abstract

How far, if at all, does the State reduce inequality? Or, how far does a particular policy affect it? To answer these questions one has to compare the actual distribution of income after taxes and benefits (a vector V4) with some hypothetical alternative distribution (VH)} The measure of income normally used in such analyses is current annual income, regardless of the past or future income of those concerned (Nicholson, 1964; Musgrave, 1964). But this is unsatisfactory, partly because a person’s current income is a bad measure of his underlying real income, and especially because much government activity redistributes a person’s lifetime income over his lifetime more than it alters its total. The ‘annual-income approach’ thus gives the wrong impression in two ways: first, it exaggerates the basic inequality of incomes and then it exaggerates the amount of redistribution.

Suggested Citation

  • Richard Layard, 1999. "On Measuring the Redistribution of Lifetime Income (1977)," Palgrave Macmillan Books, in: Tackling Inequality, chapter 3, pages 20-50, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37528-4_3
    DOI: 10.1057/9780230375284_3
    as

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