ABSTRACT
According to the cross-sectional results of the implications of redistribution policy measures we hypothesize that in Germany – known as a country with a strong redistribution policy and a high social safety net standard – public
transfers and redistributive taxes reduce income inequality and poverty intensity to a higher extent than in the United States with its more liberal social policy concept. As a more liberal society we expect higher intergenerational income mobility and a stronger influence of family background variables on intergenerational income mobility in the United States than in Germany. On grounds of weaker social welfare safety nets we also expect stronger intergenerational poverty persistence in the United States than in Germany. We analyze the equivalent family income before (pre-government) and after (post-government) taxes and subsidies of parent-child pairs in different time windows to address to non-linearities in the intergenerational income mobility setting (cf. Hyson 2003; Hertz 2004). The analysis of the intergenerational inequality and poverty intensity is based on commonly used inequality measures and poverty indexes presented in Foster et al. (1984). In the analysis of the intergenerational income mobility we employ linear and non-linear regression approaches on the permanent income variables of different cohorts in different time windows. The chapter proceeds as follows: Section 2 describes the database; Section 3 characterizes the inequality and poverty measures, as well as specifies econometric approaches used; Section 4 presents the empirical results; and Section 5 concludes with a discussion of the implications of these findings and the directions for further research.
