Redistribution and Insurance in the German Welfare State
36 Pages Posted: 21 Dec 2011 Last revised: 11 Jul 2014
Date Written: December 1, 2011
Abstract
Welfare states redistribute both between individuals reducing annual inequality and over the life-cycle insuring against income risks. But studies measuring redistribution often focus only on a one-year period. Using German SOEP data from 1984 to 2009, long-term inequality over a 20-year period is computed and then decomposed into an inter- and intra-individual component. Results show that annual inequality is higher than long-term inequality, but redistribution is also larger annually. In the long-term, the German welfare state clearly gives priority to insurance over redistribution. This gets even more pronounced at later stages of the life-cycle through the payment of social security pensions.
Keywords: long-term income inequality, income redistribution, social security
JEL Classification: D31, D63, H53, H55
Suggested Citation: Suggested Citation