SSE/EFI Working Paper Series in Economics and Finance
No 197:
Income Redistribution within the Life Cycle versus between Individuals: Empirical Evidence Using Swedish Panel Data
Anders Björklund ()
and Mårten Palme ()
Abstract: The generalised entropy measure is applied to decompose
overall income inequality over several years into one part showing
inequality of long-run (permanent) income and one part showing variability
of single individuals' incomes over time. By comparing these components of
inequality for pre- and post-tax and benefit incomes, we get an estimate of
how the welfare state affects two conceptually different components of
income inequality. Using Swedish panel data covering 18 years, we find that
income taxes primarily affect the distribution of long-run income. Although
the main effecty of benefits is on smoothing intertemporal income
variability, we also find an equalising impact on long-run income of
benefits. Income variability is highest among those with low long-run
income and the equalising effect of taxes and transfers within the life
cycle is also largest in this group.
Keywords: Generalised entropy; income inequality; income mobility; income taxes; (follow links to similar papers)
JEL-Codes: D31; H23; H24; (follow links to similar papers)
27 pages, September 29, 1997
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- This paper is forthcoming as:
-
Björklund, Anders and Mårten Palme, 'Income Redistribution within the Life Cycle versus between Individuals: Empirical Evidence Using Swedish Panel Data', in Cohen, David, Thomas Piketty and Gille Saint-Paul (eds.) New Economics of Rising Inequalities, Oxford University Press, CEPR
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