The paper highlights selected aspects of intra- and intergenerational earnings inequality in the German education and federal pension system, based on human capital theory. We develop a model of human capital accumulation across the life span and calibrate it taking into account inequality in skill formation and demographic trends in Germany until 2080. If policy aims at reducing life time earnings inequality within a generation the efficient choices are preventative investments into human capital until the age of 18 and remedial financial transfers at later ages. Due to self-productivity in human capital formation preventative policies are most effective the earlier they begin. In the intergenerational dimension additional tax financed educational investments starting in 2008 for the newborns will have beneficial effects for the cohorts born after 1975 through higher pensions. They experience an increase in their lifetime earnings, even though they finance education investments.
Pfeiffer, Friedhelm and Karsten Reuß (2008), Intra- und intergenerationale Umverteilungseffekte in der bundesdeutschen Alterssicherung auf Basis humankapitaltheoretischer Überlegungen, Deutsche Rentenversicherung 63 (1), 60-84.