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

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.

Keywords: inequality aversion, redistribution, life satisfaction, panel data

JEL Classification: C23, D31, D63, I31