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Redistribution and Insurance in the German Welfare State

SOEPpapers 419, 33 S.

Charlotte Bartels


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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.

Charlotte Bartels

Research Associate in the German Socio-Economic Panel study Department

JEL-Classification: D31;D63;H53;H55
Keywords: Long-term income inequality, Income redistribution, Social security
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