A common criticism against redistribution is that it focuses on the inequality of outcomes and that the sources of income differences are neglected. Indeed, income differences may also reflect differences in effort, and theories of Equality of Opportunity postulate that such differences should not be equalized by society. This paper examines how redistribution, via tax-benefit policies, influences equality of opportunity in European countries. The results indicate that redistribution of outcomes also improves opportunities by reducing inequitable income differences. But, from the point of view of equality of opportunity, redistribution may go too far in many European countries. This is corroborated by the finding that the extent of redistribution required to neutralize the effect of circumstances on income is smaller than the actual redistribution in most, but not all, countries.

Inequality in life expectancy shows a strong correlation with income. But does this critical dimension of inequality, extending beyond income and wealth, call for additional fiscal redistribution? In this paper, we explore how systematic differences in life expectancy and health influence optimal fiscal redistribution. We propose a parsimonious modeling framework that allows us to immediately point to the mechanisms that shape the optimal fiscal tax and transfer system when individuals differ in their life expectancy. Theoretically, we demonstrate that heterogeneity in life expectancy alone prompts a utilitarian government to redistribute from individuals with shorter to those with longer life expectancy. However, if we consider that health status may also impact on the ability to enjoy late life consumption, this redistribution can be reversed. We then develop and calibrate a quantitative life-cycle model with heterogeneous agents that differ in income and health to study optimal fiscal redistribution through the pension system.

This paper studies a reform to Social Security that provides a universal lump-sum transfer early in life in exchange for an actuarially fair reduction in retirement benefits. The policy reshapes saving and consumption profiles, with potentially large effects for credit-constrained households. Using survey data, we document persistent disparities in credit access by income and race. We then evaluate the reform in a quantitative overlapping-generations life-cycle model with incomplete markets and heterogeneity by race and education. A $40,000 transfer at age 25 generates welfare gains for all groups, equivalent to a 1.0–2.6 percent increase in lifetime consumption. Gains arise from improved consumption smoothing and lower borrowing costs and decline when the transfer is delayed. Means-tested programs, differential mortality, and bequest motives affect magnitudes but not the direction of welfare effects. Overall, reallocating Social Security wealth earlier in life improves welfare without raising government spending

We combine detailed administrative and survey data with national accounts to construct a time series of distributional national income estimates for Finland. Our approach extends the Distributional National Accounts (DINA) framework by systematically evaluating how alternative methodological choices shape measured inequality. Rather than aiming to identify a single “true” level of inequality, we emphasize transparency and robustness by presenting a range of plausible estimates derived from extensive sensitivity analyses. Most notably, we analyze how the treatment of retained earnings affects estimates of income inequality using microdata on firm ownership. We are currently working on allocating education and health care services using individual-level registry data. On the distribution of income in Finland, the DINA series show higher levels of income inequality than the narrower fiscal income series, but trends are very similar across the two approaches.