Insurance, Redistribution, and the Inequality of Lifetime Income

Peter Haan, Daniel Kemptner, Victoria Prowse and Maximilian Schaller

No 28, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: Individuals vary considerably in how much they earn during their lifetimes. This study examines the role of the tax-and-transfer system in mitigating such inequalities, which could otherwise lead to disparities in living standards. Utilizing a life-cycle model, we determine that taxes and transfers offset 45% of lifetime earnings inequality attributed to differences in productive abilities and education. Additionally, the system insures against 48% of lifetime earnings risk. Implementing a lifetime tax reform linking annual taxes to previous employment could improve the system’s insurance capabilities, albeit at the cost of a lower employment rate.

Keywords: Lifetime earnings; lifetime income; tax-and-transfer system; taxation; unemployment insurance; disability benefits; social assistance; inequality; redistribution; insurance; education; productive ability; risk; dynamic life-cycle models (search for similar items in EconPapers)
JEL-codes: D63 H23 I24 I38 J22 J31 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2023-11-13
New Economics Papers: this item is included in nep-dge and nep-lma
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Related works:
Working Paper: Insurance, redistribution, and the inequality of lifetime income (2023)
Working Paper: Insurance, Redistribution, and the Inequality of Lifetime Income (2023)
Working Paper: Insurance, Redistribution, and the Inequality of Lifetime Income (2019)
Working Paper: Insurance, Redistribution, and the Inequality of Lifetime Income (2018)
Working Paper: Insurance, Redistribution, and the Inequality of Lifetime Income (2017)
Working Paper: Insurance, Redistribution, and the Inequality of Lifetime Income (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0028

DOI: 10.48462/opus4-5112

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