IZA DP No. 974: Are People Inequality Averse, and Do They Prefer Redistribution by the State? A Revised Version
published in: Journal of Socio-Economics, 2007, 36 (2), 233-249
We link life-satisfaction data to inequality of the pre- and post-government income distribution at the regional level, to estimate the degree of inequality aversion. Three different inequality measures are used. In addition, we investigate whether a reduction in inequality by the state increases individual well-being. We find only weak evidence that Germans are inequality averse. Inequality reduction by the state does not increase wellbeing. On the contrary, inequality reduction imposes an excess burden on middle-income earners. The paper uses data from the German Socio-economic Panel Study (GSOEP) from 1985 to 1998.