Annual versus lifetime income redistribution by social security

In this study we compare the redistributive impact of the Dutch social security on an annual basis with the lifetime redistributive impact. The analysis confirms the theoretical notion that the lifetime impact is smaller than the annual incidence studies suggest. This holds especially for old-age pensions and social assistance and, to a lesser extent, the disability state pension. We also find that, for the Netherlands, the younger the cohort is, the larger the difference. However, employee insurances do not necessarily imply a smaller redistributive impact on a lifetime basis. The results are of course affected by the discount rate used and the assumptions with respect to economic growth. The discount rate generally appears to be negatively correlated with the redistributive impact, whereas the effect of growth is less straightforward. (C) 1998 Elsevier Science S.A.