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International Trends in Income Inequality and Social Policy

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  • Koen Caminada
  • Kees Goudswaard

Abstract

In most OECD-countries income inequality has increased during the last two decades. In this paper, we investigate whether changes in the overall distribution of income can be attributed to social policy measures. For most (but not all) countries we find a possible relationship between changing welfare state policies (as measured by expenditure ratios and replacement rates) and changing income inequality. Especially the United Kingdom and the Netherlands combined an above-average rise in inequality with a reduction in the generosity of the welfare system. A more elaborate budget incidence analysis for the Netherlands indicates that in the period 1981–1997 inequality of disposable household income increased sharply. The two main forces behind this phenomenon were a more unequal distribution of market incomes and changes in social transfers. Fundamental social security reforms in the Netherlands indeed seem to have made the income distribution less equal. However, income inequality in the Netherlands is still below the OECD average at the end of the observed period. Copyright Kluwer Academic Publishers 2001

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  • Koen Caminada & Kees Goudswaard, 2001. "International Trends in Income Inequality and Social Policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 395-415, August.
    • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:4:p:395-415
    DOI: 10.1023/A:1011262706412
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    More about this item

    Keywords

    social policy; income distribution (indices); taxes and transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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