The term redistribution refers to the process or the result of financial or social policy measures and developments that affect the availability of income or capital for different population groups or the distribution of income or wealth . The term “redistribution” is initially neutral, so there can be a redistribution in the direction of greater equality or greater inequality (“from bottom to top”) between different population groups. In the narrower sense, also here, it has often been understood to mean a redistribution in the direction of greater equal distribution.
Methods of redistribution
Redistribution through tax policy
Tax methods of redistribution are available
- the taxation of property such as wealth tax , inheritance tax and property tax
- an average tax rate depending on the income level . This is achieved in German tax law through basic allowances and tax progression .
- different VAT rates for basic consumer goods, normal goods and luxury goods
Redistribution through social benefits and subsidies
Redistribution also takes place through social benefits and subsidies . These are the subject of state redistribution policy. The primary distribution of income occurs through the participation of the economic sectors in economic life with the aim of generating income ( wages / salaries , interest income , rental income , profit ). However, this creates social injustices that are supposed to be offset by a secondary distribution of income . A secondary distribution of income takes place through transfer payments. Whether and to what extent a state is interested in a redistribution policy through transfer payments provides information about the prevailing economic order. A state with little or no redistribution of any kind is capitalistically oriented, while welfare states have a high proportion of secondary income distribution. Statistically, national income and social benefits add up to private income.
Redistribution within the social security system
Although the contributions to social insurance ( statutory pension insurance , statutory health insurance , unemployment insurance , long-term care insurance ) also increase with increasing income, as they are proportional to gross income up to the assessment ceiling , redistribution does not always take place here. Finally, the benefits paid are partly proportional to income ( unemployment benefit I ) or the contributions paid (pension). This is different with statutory health insurance and long-term care insurance, in which all insured persons receive the same benefit, although the amount of contributions varies greatly. Here, therefore, there is a redistribution from the higher earners to the low earners, as well as a redistribution from young insured persons (who cause less medical expenses with the same contribution amount) to older insured persons.
Redistribution through restrictions on property rights
In particular , redistribution can take place through laws and court rulings of last instance that restrict property rights . Examples: after the Second World War in the Federal Republic of Germany, burden sharing between people with little or no loss of assets and those with high or total loss of assets (those with little or no damage had to pay statutory levies to balance the burden of those with serious or total damage), bankruptcy law (legitimate expropriation of the creditor through insolvency proceedings), tenant protection rights (e.g. eviction ban despite rent arrears), consumer protection rights and employee protection rights. The redistribution here often does not take place through a real flow of money, but through the granting or waiver of certain legal interests. The monetary benefit that results from such laws is often difficult to quantify.
The burden-sharing was not about depriving wealthy people in West Germany of ownership of their property, which increased the acceptance of burden-sharing, but about obliging them to pay taxes. The taxes, which accounted for a maximum of half of the recorded assets, were divided into installments over 30 years from their income, i.e. probably also to be paid by those from their property (and were secured by forced mortgages, which encumbered a maximum of half of the assets). The aggrieved party receiving the equalization of burdens thus acquired new assets. Just as the payment obligation weighed on the assets of the debtor, the official burden compensation notices, i.e. the legal guarantee that compensation will be paid in installments over 30 years, represented assets for the injured parties that they could encumber with banks as collateral to build something new with the money raised. If the wealthy were not able to pay the taxes, they might have to raise the money by pledging the unencumbered part of their property or at least by selling it, i.e. by losing it.
In oil-rich Norway , redistribution is carried out by democratically elected governments with high taxes and social contributions. Prosperity benefits broad sections of the population. In oil-rich Nigeria, there are no state regulations for redistribution or for the protection of freedom and property. Prosperity benefits only a few.
The discussion about redistribution is a historical point of contention in social policy . For example, the “father of dynamic pensions”, Wilfrid Schreiber (1955) writes : “In the primary distribution process, the small incomes become smaller than they would be without state intervention. Although the small recipients of income now receive a supplement that - at best - restores the level of their total income under market law, they receive this supplement - in complete reversal of the facts - as alms from the hand of the state, which thus enters the completely undeserved glory of social benefactor wraps! "
The argument used to justify progressive taxation is that the effectiveness of the use of income increases progressively with increasing income. This results in a taxation of the influence that an income recipient can exercise with his income in the market and in society.
There is general consensus that redistribution is necessary when a person's biological existence or health is threatened. However, there are currently discussions in Germany and in many other countries about the extent of medical services that should be socially guaranteed. One position is that the current redistribution is too extensive and not targeted enough. The opposite position is that redistribution is not enough where the inequality of income and wealth increases.
Social scientists such as James Galbraith, Laura Spagnolo and Sergio Pinto (2007) postulate an interaction between inequality, politics and violence. As critics of “neoliberal” policies, they do not recommend fiscal redistribution, but rather an economic policy that leads to lower income differences between the various branches of the economy. In Brazil, currency devaluation has also reduced high incomes in the financial sector and thus contributed to lowering income inequality.
In connection with the discussion about distributive justice, the term “redistribution from the bottom up” was also created to criticize an economic policy that reduces the extent of redistribution.
Chrystia Freeland claims in her book The Super Rich that the "super-rich" in contrast to the "only rich" are downright beneficiaries of the redistribution because they are drawn in below average in relation to income.
According to empirical findings, happiness in life or well-being does not increase any more , even if income rises above a certain limit . For Western Europe, this limit (depending on the indicator of well-being) was a weighted equivalent annual income of 50,000 to 100,000 dollars in 2019 . (The latter value corresponded to an income of 7,062 euros per month). From the point of view of the study authors, the study results can help governments to motivate measures to redistribute wealth.
Degree of redistribution
In addition to the question of legitimacy, there is also the question of the extent of redistribution in a society. If too much is redistributed with the aim of lowering inequality, this reduces everyone's willingness to perform. Performance is then no longer rewarded with a higher income. If too little is redistributed, the potential for conflict increases.
The degree of redistribution, which aims to limit unequal distribution, results from the degree of unequal distribution : with extremely high unequal distributions, the risk of violent conflict increases. It is controversial as to the degree of inequality at which violent redistribution becomes apparent and whether inequality and rebellion are actually related to one another. On the basis of the unequal distributions of income determined for different countries, it can be observed that the Gini coefficients for market-economy and democratically oriented countries remain well below 0.5. For statements like “A coefficient of 0.3 or less indicates substantial equality; 0.3 to 0.4 indicate acceptable normality; 0.4 and higher is considered too high. At 0.6 or higher, social unrest can be predicted. ”There is often a lack of information on the method of calculating the inequality of distribution, without which the Gini coefficient cannot be adequately understood. “A perceived impression of unequal participation is a common component of rebellion in societies,” however, Amartya Sen (1973) also said .
While the comparison of unequal measures of distribution before and after taxes expresses the degree of redistribution of income through tax progression , the social quota describes which part of the gross national product is withdrawn from individual use and used to finance social tasks. This quota is thus a measure of the degree of redistribution from individually determined income to purposes determined by the community.
If resources are unevenly distributed in a society, then the Hoover unequal distribution describes directly what proportion of the total resources would have to be redistributed in order to achieve an equal distribution . (This does not mean that an equal distribution can normatively be derived from this unequal distribution as a goal.) The Hoover unequal distribution is the simplest of all inequalities and does not take into account the information-theoretical calculable effort for such a redistribution. However , this effort is included in the calculation of the Theil Index . This is why the Theil index initially rises more slowly than the Hoover inequality if the distribution is the same. Only in the case of higher and thus “clearer” inequalities does the increase in the Theil index overtake the increase in the Hoover inequality.
The thesis that large social differences lead to an increased number of property crimes remains controversial. The high crime rates of some metropolises in the United States are cited as well as the practice of the socialist states in Eastern Europe, where social differences were officially small but property crimes were by no means eliminated. With both arguments it must be taken into account that social differences are only one of many possible factors that can influence the level of drug-related crime. (see also reducing crime at Voght ). The comparatively egalitarian Australia leads the global ranking of thefts per inhabitant. However, an increase in the number of prisoners per inhabitant with the inequality can be observed if the inequality of income exceeds a certain level.
The free rider problem
Redistribution is prone to the free rider problem as it enables the use of goods for free . This increases the incentive to use public goods (e.g. social benefits) compared to goods in private ownership , while at the same time the incentive to provide these public goods (e.g. through taxes or extra work) is low. This can lead to the financial erosion of the public sector (e.g. in the form of national debt ). The social science model in this regard is called the tragedy of the commons . Restrictions on access to public goods would solve the commons problem, but are often politically neither desirable nor easily enforceable.
Redistribution between income groups in Germany
|Quantiles||Household gross equivalent income lower limit (€ / month)||Gross household income||Income and corporate taxes||Excise duties||Total taxes||Social contributions||Total tax burden||Deviation|
|1st decile||0||2.6||0.0||5.4||2.4||0.7||1.6||- 1.0|
|2nd decile||966||3.7||0.1||6.3||2.9||2.6||2.7||- 1.0|
|3rd decile||1 324||4.9||0.5||7.3||3.5||4.3||3.9||- 1.0|
|4th decile||1 671||5.7||1.1||8.3||4.3||5.8||5.0||- 0.7|
|5th decile||1 993||7.0||2.1||9.0||5.2||7.7||6.3||- 0.7|
|6th decile||2,389||8.0||3.9||9.4||6.4||9.6||7.9||- 0.1|
|7th decile||2,798||9.7||6.6||10.2||8.2||12.1||10.1||+ 0.4|
|8th decile||3 343||11.7||10.3||11.7||10.9||15.5||13.1||+ 1.4|
|9th decile||4019||14.5||16.1||12.7||14.6||19.0||16.6||+ 2.1|
|10th decile||5 271||32.1||59.1||19.7||41.5||22.8||32.8||+0.7|
|Top 1.0%||12 892||9.9||25.8||4.4||16.3||1.7||9.5||-0.4|
|Top 0.1%||36 885||4.3||12.1||1.6||7.4||0.1||4.0||−0.3|
Direct taxes are clearly progressive : increasing from decile to decile. In contrast, indirect taxes have a strongly degressive effect. Thus the entire tax burden is degressive in the lower section and progressive only in the upper section; as well as the total load, but with the exception of the top decile in which the exceeding of the income threshold leads with the Social Security to falling load. Bach also points out that the progression of the tax burden for the rich is likely to be overstated, since both retained corporate profits and profits and capital income from (lower taxed) foreign countries are not recorded.
It can be clearly seen that the above-average “top performers” in the redistribution are in deciles 7 to 10. The deciles 5 to 9 “add up” to social security, while the 9th and 10th deciles are due to direct taxes.
The proportion of the population in favor of greater redistribution has increased from 66% in 2007 to 77% in 2019.
- Social policy
- social justice
- social inequality
- Welfare economy
- Distribution of income
- Fairness of performance
- Axel Honneth , Nancy Fraser : Redistribution or Recognition ?: A Political-Philosophical Controversy . Suhrkamp, Frankfurt 2003, ISBN 978-3-51829060-6
- Stefan D. Josten: Inequality, State Redistribution and Overall Economic Growth , 2008, ISBN 978-3-8305-1377-3
- Bertrand de Jouvenel : The ethics of redistribution . With a foreword to the German translation by Hardy Bouillon and a summarizing appreciation of de Jouvenel by the editor Gerd Habermann , Olzog, Munich 2012, ISBN 978-3-95768005-1 (Original: The Ethics of Redistribution , 1951)
- Niklas Luhmann : The economy of society , p. 136 ff. And whole chapter 10: Limits of control , 1988, ISBN 3-518-28752-4
- Christoph Scheicher: Poverty, Wealth, Redistribution: Concept and Statistical Measurement . Eul, Cologne 2009, ISBN 978-3-89936-808-6
- Bach, Stefan; Beznoska, Martin; Steiner Viktor; u. a .: Who bears the tax burden in Germany? Distribution effects of the German tax and transfer system. in: 'Political Advice Compact 114/2016.
- Christian Barry: Redistribution. In: Edward N. Zalta (Ed.): Stanford Encyclopedia of Philosophy .
- Norbert Berthold , Klaus Gründler, Sebastian Köllner: What drives state redistribution? , Wirtschaftsdienst , Volume 96, 2016, Issue 13, 32–37
- Expert council : Strong redistribution, low mobility , annual report 1016/21017, Chapter 10, 398 - 429
- ZEW : Redistribution Effects and Effectiveness of European Social Transfer Systems
- Wilfrid Schreiber : Security of Existence in the Industrial Society , PDF ( Memento of the original from September 27, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. , 1955, source: Article published by the Association of Catholic Entrepreneurs (BKU).
- James K. Galbraith, Laura T. Spagnolo, Sergio Pinto: Economic Inequality and Political Power ( Memento of the original dated August 25, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. : A Comparative Analysis of Argentina and Brazil , 2007
- Chrystia Freeland The super rich . Rise and rule of a new global money elite. Westend Verlag GmbH, Frankfurt 2013. ISBN 978-3-86489-045-1 . passim
- Andrew T. Jebb, Louis Tay, Ed Diener, Shigehiro Oishi: Happiness, income satiation and turning points around the world . In: Nature Human Behavior . tape 2 , no. 1 , 2018, ISSN 2397-3374 , p. 33–38 , doi : 10.1038 / s41562-017-0277-0 ( nature.com [accessed September 17, 2019]).
- Book review in the New York Review of Books by Liu Binyan, Perry Link: A Great Leap Backward?
- Eberhard Schaich: Lorenz curve and Gini coefficient in a critical view . Yearbooks for Economics and Statistics 185 (1971), pp. 193-208
- Amartya Sen: On Economic Inequality , 1973; expanded edition with substantial annexe by James E. Foster and Amartya Sen, 1996
- Archived copy ( memento of the original dated November 9, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- Equivalence weighted according to the OECD scale
- Stefan Bach : Our taxes. Who is paying? How much? For what? , Westend Frankfurt / Main 2016, p. 157.
- median value
- Stefan Bach : Our taxes. Who is paying? How much? For what? , Westend Frankfurt / Main 2016, p. 158 f.
- Robert B. Vehrkamp, Andreas Kleinsteuber: Social Justice 2007 - Results of a representative survey of citizens . Ed .: Bertelsmann Foundation. Gütersloh December 2007 ( bertelsmann-stiftung.de [PDF]).
- OECD study: Pension is one of the main concerns of Germans. In: time online. Time, March 2019, accessed April 27, 2020 .