Decomposition Approach on Changes in Redistributive Effects of Taxes and Social Insurance Premiums

In this paper, we examine the redistributive effects of taxes and social insurance premiums in Japan. The change in redistributive effects over time includes not only a contribution of changes in the tax and social insurance systems (“reform effect”), but also a contribution of changes in income distribution or demographics (“non-reform effect”). Therefore, we attempt to capture the true contribution of the reform effect. For achieving this purpose, we use household micro data from the National Survey of Family Income and Expenditure (NSFIE) in 1989-2014 by the Ministry of Internal Affairs and Communications, and estimate the tax and social insurance burdens on households by applying information, such as family unit, income, etc., reported in the questionnaire to the actual system. And, we decompose the redistributive effect into the “reform effect” and the “non-reform effect”, and examine the contributions of each effect. We show that the taxes and social insurance premiums mitigated the widening of income disparity, but the “reform effect” didn’t have a contribution to the change in the redistribution effect. Although it is increasingly important to fund the social security cost, it is required to consider the future of taxes and social insurance premiums, taking into account the enhancement of the redistributive effects of them.