Insurance, Redistribution, and the Inequality of Lifetime Income
- Individuals vary considerably in how much they earn during their lifetimes. This study examines the role of the tax-and-transfer system in mitigating such inequalities, which could otherwise lead to disparities in living standards. Utilizing a life-cycle model, we determine that taxes and transfers offset 45% of lifetime earnings inequality attributed to differences in productive abilities and education. Additionally, the system insures against 48% of lifetime earnings risk. Implementing a lifetime tax reform linking annual taxes to previous employment could improve the system’s insurance capabilities, albeit at the cost of a lower employment rate.
Document Type: | Working Paper |
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Language: | English |
Author(s): | Peter Haan, Daniel Kemptner, Victoria Prowse, Maximilian Schaller |
Parent Title (English): | Berlin School of Economics Discussion Papers |
Hertie Collections (Serial Number): | Berlin School of Economics Discussion Papers (28) |
Publication year: | 2023 |
Publishing Institution: | Hertie School |
Number pages: | 70 |
Related URL: | https://berlinschoolofeconomics.de/insights/bse-discussion-papers |
DOI: | https://doi.org/10.48462/opus4-5112 |
Release Date: | 2023/11/13 |
Tag: | Economics |
Edition: | No. 28 |
Hertie School Research: | BerlinSchoolOfEcon_Discussion_Papers |
Licence of document (German): | ![]() |