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Are People Inequality Averse, and Do They Prefer Redistribution by the State? Evidence from German Longitudinal Data on Life Satisfaction

Discussion Papers 285, 28 S.

Johannes Schwarze, Marco Härpfer

2002. Dez.

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We link life-satisfaction data to inequality of the pre-government income distribution at the regional level, to estimate the degree of inequality aversion. In addition, we investigate whether a reduction in inequality by the state increases individual well-being. We find that Germans are inequality averse over the entire income distribution. However, inequality reduction by the state does not increase well-being. On the contrary, inequality reduction places something of an excess burden on middle-income earners. The paper uses data from the German Socio-economic Panel Study (GSOEP) from 1985 to 1998.

JEL-Classification: C23;D31;D63;I31
Keywords: Inequality aversion, redistribution, life satisfaction, panel data
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