Lifetime Income Inequality and RedistributionGiacomo Corneo
8. Dezember 2022
Giacomo Corneo (FU Berlin) presents his project "Lifetime Income Inequality and Redistribution" in our Microeconomics Research Seminar. This seminar will be only held ONLINE.
Abstract: This paper explores actual lifetime income inequality and redistribution over a large number of cohorts in Germany. Starting with the 1935 cohort, we document a secular rise of lifetime income inequality, both pre-fisc and post-fisc. The German tax-transfer system is linearly progressive in lifetime income and exerts a substantial impact on the disposable incomes of the top and bottom decile. Governmental income redistribution mechanically reduces lifetime inequality by one fifth to one fourth; the lion’s share of this reduction is effectuated by the personal income tax. The rise of lifetime inequality in terms of equivalized income has been contained by a reduced propensity of individuals in the bottom quartile to form a family. Differential mortality is sizable but eliminating it would not markedly reduce lifetime income inequality. We develop a theoretically founded money-metric welfare measure that takes the value of greater longevity into account. We find that differential mortality is a major driver of lifetime welfare inequality.