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How Sustainable is Need-Based Redistribution?

In: Priority of Needs?

Author

Listed:
  • Stefan Traub

    (Helmut-Schmidt University Hamburg)

  • Jan Philipp Krügel

    (Helmut-Schmidt University Hamburg)

  • Meike Benker

    (Helmut-Schmidt University Hamburg)

Abstract

This chapter examines the economic sustainability of need-based income redistribution via the welfare state. We model the welfare state as an insurance device to reduce the variance of lifetime incomes when social inequality results from individual risk-taking, specifically educational investment. Our contract-theoretic model analysis shows that income redistribution can lead to higher efficiency and overall welfare under certain conditions. In this context, need-based redistribution, which includes an explicit means test, is clearly superior to an unconditional basic income. Experimental tests of the model confirm the hypothesis that need-based redistribution is sustainable. From our theoretical and experimental results, we conclude that a lexicographic combination of need-based justice and equity—the Boulding principle—not only reflects the redistribution preferences of the population well, but is also convincing from an ethical perspective.

Suggested Citation

  • Stefan Traub & Jan Philipp Krügel & Meike Benker, 2024. "How Sustainable is Need-Based Redistribution?," Springer Books, in: Bernhard Kittel & Stefan Traub (ed.), Priority of Needs?, chapter 0, pages 195-232, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-53051-7_8
    DOI: 10.1007/978-3-031-53051-7_8
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