Cluster-Seminar Öffentliche Finanzen und Lebenslagen

(together with Daniel Kemptner and Victoria Prowse)
In this paper, we analyze how income taxes, transfer programs and the pension system affect inequality in lifetime income. Importantly, we consider pre-retirement and post-retirement income and thereby we extend the previous literature on lifetime inequality, which has only considered income received before retirement. We use a dynamic structural life-cycle model to derive trajectories of earnings and net income over the whole life-cycle. Based on these life-cycle profiles, we investigate the drivers of inequality in lifetime gross earnings and we study the impact of taxes, transfer and pensions on inequality in lifetime net income. We also explore how major sources of life-cycle risk, namely employment an health risks, affect life-time income and how the different fiscal programmes provide insurance for these life-cycle risks.