Does inequality undermine support for democracy? While previous research has either focused on macro-level associations or alleged a uniform relationship between inequality and individual democratic support across countries, this paper documents the importance of the current regime type and of the source of inequality for such a linkage. Exploiting differential transition to democracy after the collapse of the Soviet Union allows to investigate the association of democratic support across regimes with differing levels of democracy. Inequality is found to erode democratic support in democracies and to foster democratic beliefs in non-democracies. In other words, inequality always subverts individual-level support for the current regime type. Further, evidence is provided for the relevance of disentangling the sources of economic inequality in line with fairness concerns: While unfair inequality (generated by factors beyond an individual’s control) and total inequality both are significantly correlated to democratic support, unfair inequality appears to be the relevant inequality component driving this association.

L’effort de consolidation budgétaire annoncé impliquera des arbitrages entre différentes mesures socio-fiscales concernant les ménages. Au-delà de leur impact budgétaire, ces mesures peuvent engendrer d’importants effets redistributifs. Pour éclairer les arbitrages possibles, nous commençons par présenter le cadre fixé par la loi de finances pour 2025, et plus particulièrement la contribution différentielle sur les hauts revenus. Nous proposons ensuite une analyse des effets budgétaires et redistributifs de différentes mesures qui peuvent contribuer à la consolidation budgétaire, à la fois du côté des recettes et du côté des dépenses, avec les prestations et transferts en direction des ménages.

Policy paper based on Inequality of Opportunity in South Asia: The Puzzle of Educational Gains Without Consumption Gains (see below)

The expansion of internet access has been promoted in many developing countries to foster economic growth and equalize opportunities. Yet, evidence on the effects of internet access on educational opportunities remains scarce and inconclusive. Documenting and exploiting a massive shock to internet access across all of India, we provide robust evidence for gender-specific impact of expanding internet access to adolescents in India and find no effect for males but positive effects for females. Further, we show that the zero effect for males masks considerable heterogeneity by parental background as individuals with non-educated parents are negatively affected whereas those of more educated parents profit from the internet access expansion.

More than two decades of sustained economic growth in most of South Asia brought significant reductions in poverty, yet inclusive social progress has remained elusive. Using a pseudo-panel approach with a large-scale harmonized dataset of 16 million observations across seven South Asian countries, we trace the evolution of inequality of opportunity (IOp) across cohorts born 1950-2000 for three outcomes: education, labor markets, and consumption. We find substantial improvements in educational opportunities and unchanging high levels of IOp for consumption. Three labor market factors explain this divergence. First, educational expansion focused on basic schooling for the 1950s-80s cohorts—a skill level with limited labor market returns. Second, despite narrowing gender gaps in educational attainment, female labor force participation remains stubbornly low across cohorts. Third, even among equally educated individuals, circumstances continue to predict labor outcomes, evidencing discrimination in labor market access.

Parental background exhibits sizable influence on income opportunities through educational/occupational choice. But few research has focused on how the influence of parental background unfolds across the life-cycle beyond these two key decisions. Asking at what ages do opportunities narrow down, this project maps out the income opportunities available to individuals across the life-cycle conceptualized as the life-time income trajectory at a given age. In a first step, the reduced-form influence of parental background on income across the lifecycle is documented in a simple regression framework. To investigate how this influence translates into lifetime income opportunities, in a second step, we look at birth cohorts and partition the respective population into types based on parental background but also into sub-types based on income earned every ten years. Calculating the average value of lifetime income for each type and subtype, we illustrate the evolution of inequality (i.e., the gap between the lucky and the unlucky in terms of decadal income). Assessing inequality between these types in the spirit of the inequality of opportunity framework (Roemer 1998) across decades, we show when inequality increases during the life cycle. In a similar fashion, we examine the average variance within the (sub)types across decades to map its evolution and determine when the fate is determined for most subtypes, i.e., when the lifetime income trajectory is set.

In Germany, the size of unemployment benefits depends on net income after substracting withholding taxes. This means that conditional on the same gross income, individuals receive substantially different levels of unemployment benefit depending on their withholding tax class. We document that individuals are unaware of the link between withholding tax class and the unemployment benefit level. This allows us to study the effects of a tax reform that, conditional on income, increased the generosity of unemployment benefits specifically for one group of women by EUR 50-180 per month. In contrast to previous studies, this setting allows us to study the effects of an increase in UI benefits on the whole income distribution.