The missing linkage of ‘from whom to whom’ - a microsimulation of ego-alter similarity in personal support networks and its distributive effects in income inequality
Annalena OppelStudies on the distributive effects of private redistribution, and remittances in particular, often follow a balance sheet approach: accounting for a deduction reflected in what an individual gives to others as well as an addition in terms of what an individual gets from others. However, this approach rarely accounts for attributes of 'others' regarding from whom private transfers are received or to whom transfers are provided. Yet, insights on the dynamics of prosocial behavior show that potential socioeconomic orientations in these ‘matching processes’ of giving and receiving matter for a more complete assessment of the effects of private redistribution on income inequality.
Using a microsimulation model, I set out to explore the following question: to what extent does accounting for ego-alter similarity in personal networks of economic support impact distributive effects on income inequality? I derive behavioral patterns from 205 personal networks of adult Namibians and simulate these patterns on an adjusted sample of Namibia's income distribution provided by national census data. I compare distributive effects comparing a conventional balance sheet approach with a relation approach regarding general transfer impacts, income ranks, and income inequality overall.
I document three main results. First, I find that a relational approach provides particularly useful insights regarding low-income individuals. Relational dynamics seem to matter for lower- and middle-income individuals whereby an upward shift in ranks for poorer individuals is more likely due to lower upward effect for middle-income individuals rather than a redistribution from the top to the bottom. Second, relational dynamics seem to cancel out more among high-level individuals suggesting more economic peer-level support among the better off. Third, both approaches suggest that inequality, however, decreases after private redistribution has taken place.