Wealth inequality and redistribution : Possibilities of redistributive policies with an application to Sweden, Germany and the UK.

Abstract: The aim of the study is to answer what governments can do to work against increasing wealth and income inequalities. In a theoretical part I describe how inheritance and income inequality are important driving factors to wealth inequality and the potential role of the government to counteract increasing monetary inequalities. The empirical part narrows the scope to income inequalities and how the governments of Sweden, Germany and the UK have conducted their redistribution policies between the 80’s and the mid 00’s. The most interesting results from the empirical part indicate that income inequalities before any income redistribution has risen in all three countries, income inequality after income redistribution has also risen but not as much. The UK clearly is the country which redistribute the least and in addition has the greatest post redistribution income inequality, much greater than both Sweden and Germany which redistribute about as much of income. Further, it is shown that poor citizens in all three countries in all years gain relatively more (net gain of redistribution as share of an individuals’ total income) than wealthy from the redistribution scheme. Due to lack of wealth data the empirical calculations were based on capital income as a proxy for wealth.