Discussion paper
DP18758 How Does Predistribution Affect Redistribution?
This paper presents an analysis of the consequences for redistribution policies of achieving a more equal predistribution, that is, a more equal distribution of the predetermined income earning capabilities that individuals bring to the market. We show that optimal fiscal policies are less redistributive when the predistribution is more equal. We then quantify the value of a more equal predistribution. We show that total consumption is higher with a more equal predistribution. We also develop a money metric measure of social welfare and show that a more equal predistribution increases this measure for a Utilitarian and Prioritarian Social Welfare Function but may decrease it for the Maximin.
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