Public Redistribution and Intergenerational Income Dependency

This study examines intergenerational income dependency in incomes before and after public cash and in-kind transfers. We use administrative data from Denmark and estimate intergenerational dependency with a rank-rank specification. We predict in-kind transfers from childcare, schooling, education, and health care during the working life and find that rank-rank estimates of dependency in income after public in-kind transfers based on annual income at age 35 or 10-year averages are underestimated compared to estimates based on working life transfers. Rank-rank coefficients are reduced by 6% when childcare, school and health care working life transfers are added to disposable income but increases by 16% when education transfers are added, cancelling reductions of other transfers. In comparison, cash transfers reduce income dependency by 8%. Intergenerational dependency may therefore be larger (smaller) than previously assessed in countries with more heavily subsidized education (health) systems