Niehues, Judith (2011) Income Inequality, Inequality of Opportunity and Redistributive Policies. PhD thesis, Universität zu Köln.
Over the last two decades, income inequality has increased in most developed welfare states. Therefore, redistributive policies are high on the political agenda of many countries. From a policy perspective, the correct empirical assessment of the redistributive effects of taxes and benefits is important to develop a well-designed redistributive policy mix. This thesis contributes to the understanding and measurement of redistribution by examining redistributive policies and income inequality and their interdependencies. The first empirical analysis explores the size and structure of effective redistribution in a broad sample of European welfare states. Besides answering the question of how different components of the tax and transfer system contribute to disposable income inequality, it also investigates whether the findings are sensitive to the underlying measurement method. Chapter 3 presents two detailed case studies of Germany and the United Kingdom and examines whether the structure of fiscal policies has changed over the last two decades. The analysis provides a comprehensive dynamic analysis of effective progressivity and redistribution by including all major fiscal elements: direct taxation, pay roll taxes, indirect taxes and benefits. Chapter 4 focuses on the identification of the causal effect of redistributive spending policies on income inequality by using a dynamic panel approach and some exogenous variation in social spending levels as an instrument. In contrast to the previous chapters, it explicitly discusses possible second-order effects of redistributive policies. Chapter 5 introduces the concept of inequality of opportunity instead of the traditional inequality of outcome approach. Given that previous estimates of unfair inequality could only provide lower bounds, the study suggests a new panel estimator which additionally allows identifying an upper bound of inequality of opportunity. The approach is illustrated by comparing Germany and the United States based on harmonized micro data. Overall, the book shows that tax benefit systems substantially reduce income inequality in all EU member states, with distinct redistributive capacities of different welfare state instruments. The amount of effective redistribution is significantly reduced when considering indirect taxes and second-order effects. Finally, while tax benefit systems equalize outcomes, they do not reveal a differential impact on unequal opportunities.
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