Public Finances and Living Conditions

Research Cluster

Changing economic and social living conditions and the distributional effects, incentive effects and behavioral effects of government activity are investigated in the Public Finances and Living Condi-tions research cluster. The focus is on empirical analyses which are based on representative micro-data from the official statistics or the scientifically supported data infrastructure.

The new research cluster consists of the Department of Public Economics, the newly established focus department for Educational Policy and the research infrastructure German Socio-Economic Panel Study (SOEP). The amalgamation into a research cluster is essentially the result of similar methodology and closely related content: in all three areas, empirical analyses on the basis of micro-data are prevalent, using similar methods. In view of the topics of distribution of income and wealth, the effects of the German tax and transfer system, the effect of the labor market and family policy, and the focus on educational matters, there are complementary agendas for research and consul-tancy services in the different areas.

The term "living conditions" was chosen as part of the name of the research cluster because, on the one hand, this incorporates the multidimensionality of aspects of social inequality in modern socie-ties, and, on the other hand, it also refers to the individual room to maneuver of people in specific conditions and with external restrictions on their degree of autonomy of action.

The term "public finances" is to be understood as government action affecting the living conditions of individuals and households or the economic situation of companies through political measures such as taxation, transfer payments, labor market regulations or educational institutions. The central issues are the resultant distributional effects, changes in the behavior patterns of the participants, and the availability of sufficient public finances. Econometric methods and microsimulation are used for the impact analysis of government action. In this respect, the research cluster continues the long tradition of DIW Berlin in the development and application of microsimulation models and the use of microeconometric methods.

Educational policy is a particular focus of DIW Berlin and other research institutes in Berlin (including the WZB (Science Center Berlin) and the Max Planck Institute for Human Development). Educational research examines, inter alia, the significance of the living conditions of economic participants in view of their human capital. This is also carried out in conjunction with the analysis of incentive ef-fects, which are linked to the publicly funded institutions and/or measures. For example, there is a focus on how educational outcomes (cognitive or non-cognitive skills) correlate with publicly fi-nanced services and the living conditions of the individuals.