Estimating the redistributive effects of the federal unemployment and pension insurance on the regional income distribution in Germany

Abstract

The reduction of income disparities between regions is a basic target of regional policy in most advanced economies. Although expenditures on social policies are substantial parts of government spending as compared with regional policies, yet little is known about their effects on regional inequalities. In this note we show how, due to large regional economic disparities, payments from social insurance reduce interregional income disparities in Germany. We focus on the effects of the national pension and unemployment insurance. The results reveal large regional redistributive effects across regions and emphasize the need for further research on the geography of the welfare system and its impact on regional economic disparities.regional income inequalities, income distribution, social insurance