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Are People Inequality Averse, and Do They Prefer Redistribution by the State? A Revised Version

Author

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  • Schwarze, Johannes

    (University of Bamberg)

  • Härpfer, Marco

    (University of Oldenburg)

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 wellbeing. 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.

Suggested Citation

  • Schwarze, Johannes & Härpfer, Marco, 2003. "Are People Inequality Averse, and Do They Prefer Redistribution by the State? A Revised Version," IZA Discussion Papers 974, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp974
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    References listed on IDEAS

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    1. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 447-487.
    2. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
    3. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
    4. Lester C. Thurow, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(2), pages 327-336.
    5. Morawetz, David, 1977. "Income Distribution and Self-Rated Happiness: Some Empirical Evidence," Economic Journal, Royal Economic Society, vol. 87(347), pages 511-522, September.
    6. 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 334-338, May.
    7. 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.
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    Cited by:

    1. D'Ambrosio, Conchita & Frick, Joachim R., 2004. "Subjective Well-Being and Relative Deprivation: An Empirical Link," IZA Discussion Papers 1351, Institute of Labor Economics (IZA).
    2. Gaeta, Giuseppe Lucio, 2011. "In the mood for redistribution. An empirical analysis of individual preferences for redistribution in Italy," MPRA Paper 32049, University Library of Munich, Germany.
    3. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
    4. Conchita D'Ambrosio & Joachim R. Frick, 2012. "Individual Wellbeing in a Dynamic Perspective," Economica, London School of Economics and Political Science, vol. 79(314), pages 284-302, April.
    5. Dominique Demougin & Claude Fluet & Carsten Helm, 2006. "Output and wages with inequality averse agents," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(2), pages 399-413, May.
    6. Jukka Pirttilä & Roope Uusitalo, 2010. "A ‘Leaky Bucket’ in the Real World: Estimating Inequality Aversion using Survey Data," Economica, London School of Economics and Political Science, vol. 77(305), pages 60-76, January.

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    More about this item

    Keywords

    life satisfaction; redistribution; inequality aversion; panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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, Well-Being, and Poverty - - - General Welfare, Well-Being

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