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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.

Suggested Citation

  • Bartels, Charlotte, 2011. "Redistribution and insurance in the German welfare state," Discussion Papers 2011/25, Free University Berlin, School of Business & Economics.
  • Handle: RePEc:zbw:fubsbe:201125
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    References listed on IDEAS

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    Cited by:

    1. Mike Brewer & Monica Costa Dias & Jonathan Shaw, 2012. "Lifetime inequality and redistribution," IFS Working Papers W12/23, Institute for Fiscal Studies.
    2. Bartels, Charlotte, 2012. "Long-term participation tax rates," Discussion Papers 2012/20, Free University Berlin, School of Business & Economics.
    3. Jonathan Shaw, 2014. "The redistribution and insurance value of welfare reform," IFS Working Papers W14/21, Institute for Fiscal Studies.

    More about this item

    Keywords

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

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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