Advanced Search
MyIDEAS: Login

Analysing the Effects of Tax-benefit Reforms on Income Distribution: A decomposition Approach

Contents:

Author Info

  • Olivier Bargain

    (University College Dublin (UCD))

  • Tim Callan

    (Economic and Social Research Institute (ESRI))

Abstract

To assess the impact of tax-benefit policy changes on income distribution over time, we suggest a decomposition methodology based on counterfactual simulations. First, it provides an absolute measure of the impact of tax-benefit changes on inequality, which combines changes in policy structure (rules, rates, etc.) and changes in monetary parameters (benefit amounts, tax bands, etc.) against a distributionally-neutral benchmark, i.e., a situation where monetary parameters are nominally adjusted in line with income growth. We apply this measure to analyze the effect of recent policy changes in twelve European countries. Secondly, we focus on France and Ireland to assess the relative role of policy changes compared to changes in pre-tax income (distribution, composition, demographic structure, etc.). We conduct this exercise for a battery of poverty and inequality measures and check the sensitivity of the results to the decomposition order.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.esri.ie/UserFiles/publications/20070711094151/WP197.pdf
File Function: First version, 2007
Download Restriction: no

Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP197.

as in new window
Length: 15 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:esr:wpaper:wp197

Contact details of provider:
Postal: Whitaker Square, Sir John Rogerson's Quay, Dublin 2
Phone: (353-1) 863 2000
Fax: (353-1) 863 2100
Email:
Web page: http://www.esri.ie
More information through EDIRC

Related research

Keywords: tax-benefit policy; inequality; poverty; decomposition; microsimulation;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Thor O. Thoresen, 2004. "Reduced Tax Progressivity in Norway in the Nineties: The Effect from Tax Changes," International Tax and Public Finance, Springer, vol. 11(4), pages 487-506, 08.
  2. repec:ese:iserwp:2004-05 is not listed on IDEAS
  3. Bargain, Olivier & Orsini, Kristian, 2004. "In-work policies in Europe: killing two birds with one stone?," EUROMOD Working Papers EM4/04, EUROMOD at the Institute for Social and Economic Research.
  4. Herwig Immervoll & Horacio Levy & Christine Lietz & Daniela Mantovani & Holly Sutherland, 2006. "The sensitivity of poverty rates to macro-level changes in the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 30(2), pages 181-199, March.
  5. Atkinson, A.B., 2005. "EUROMOD and the development of EU social policy," EUROMOD Working Papers EM1/05, EUROMOD at the Institute for Social and Economic Research.
  6. Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, D. & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2005. "Household incomes and redistribution in the European Union: quantifying the equalising properties of taxes and benefits," EUROMOD Working Papers EM9/05, EUROMOD at the Institute for Social and Economic Research.
  7. Jenkins, Stephen P, 1995. "Accounting for Inequality Trends: Decomposition Analyses for the UK, 1971-86," Economica, London School of Economics and Political Science, vol. 62(245), pages 29-63, February.
  8. François Bourguignon & Amadéo Spadaro, 2005. "Microsimulation as a tool for evaluating redistribution policies," PSE Working Papers halshs-00590863, HAL.
  9. Callan, Tim & van Soest, Arthur & Walsh, John R., 2007. "Tax Structure and Female Labour Market Participation: Evidence from Ireland," IZA Discussion Papers 3090, Institute for the Study of Labor (IZA).
  10. Lambert, Peter J & Pfahler, Wilhelm, 1992. "Income Tax Progression and Redistributive Effect: The Influence of Changes in the Pre-tax Income Distribution," Public Finance = Finances publiques, , vol. 47(1), pages 1-16.
  11. Olivier Bargain, 2004. "Aides au retour à l'emploi et activité des femmes en couple," Revue de l'OFCE, Presses de Sciences-Po, vol. 88(1), pages 59-87.
  12. Immervoll, Herwig, 2004. "Falling up the stairs: an exploration of the effects of 'bracket creep' on household incomes," EUROMOD Working Papers EM3/04, EUROMOD at the Institute for Social and Economic Research.
  13. Jenkins, Stephen P. & Van Kerm, Philippe, 2004. "Accounting for income distribution trends: A density function decomposition approach," IRISS Working Paper Series 2004-07, IRISS at CEPS/INSTEAD.
  14. Brewer, M. & Goodman, A. & Shaw, J. & Shephard, A., 2005. "Poverty and inequality in Britain: 2005," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  15. Stanislav Kolenikov & Anthony Shorrocks, 2005. "A Decomposition Analysis of Regional Poverty in Russia," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 25-46, 02.
  16. Kakwani, Nanak C, 1977. "Applications of Lorenz Curves in Economic Analysis," Econometrica, Econometric Society, vol. 45(3), pages 719-27, April.
  17. Milanovic, Branko, 1994. "Income Tax Progression and Redistributive Effect: The Influence of Changes in the Pre-tax Income Distribution: Comment," Public Finance = Finances publiques, , vol. 49(1), pages 126-33.
  18. Brian Nolan & Bertrand Maitre, 2000. "A Comparative Perspective on Trends in Income Inequality in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 31(4), pages 329-350.
  19. Mantovani, Daniela & Sutherland, Holly, 2003. "Social indicators and other income statistics using the EUROMOD baseline: a comparison with Eurostat and National Statistics," EUROMOD Working Papers EM1/03, EUROMOD at the Institute for Social and Economic Research.
  20. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, February.
  21. Tom Clark & Andrew Leicester, 2004. "Inequality and two decades of British tax and benefit reform," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 129-158, June.
  22. John Creedy & Guyonne Kalb & Rosanna Scutella, 2006. "Income distribution in discrete hours behavioural microsimulation models: An illustration," Journal of Economic Inequality, Springer, vol. 4(1), pages 57-76, April.
  23. Callan, Tim & Walsh, John, 2006. "Assessing the impact of tax/transfer policy changes on poverty: methodological issues and some European evidence," EUROMOD Working Papers EM1/06, EUROMOD at the Institute for Social and Economic Research.
  24. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-56, February.
  25. Sheldon Danziger, 1980. "Do Working Wives Increase Family Income Inequality?," Journal of Human Resources, University of Wisconsin Press, vol. 15(3), pages 444-451.
  26. Dardanoni, Valentino & Lambert, Peter J., 2002. "Progressivity comparisons," Journal of Public Economics, Elsevier, vol. 86(1), pages 99-122, October.
  27. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
  28. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Deutsch, Joseph & Fusco, Alessio & Silber, Jacques, 2013. "The BIP Trilogy (bipolarization, inequality and polarization): One saga but three different stories," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(22), pages 1-33.
  2. Herwig Immervoll & Linda Richardson, 2011. "Redistribution Policy and Inequality Reduction in OECD Countries: What Has Changed in Two Decades?," OECD Social, Employment and Migration Working Papers 122, OECD Publishing.
  3. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2011. "Tax Policy and Income Inequality in the U.S., 1978-2009: A Decomposition Approach," IZA Discussion Papers 5910, Institute for the Study of Labor (IZA).
  4. Andreas Peichl & Nico Pestel & Hilmar Schneider, 2010. "Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany," CESifo Working Paper Series 3219, CESifo Group Munich.
  5. Guillaume Allègre, 2012. "Work, family or state ? from wage inequalitie ans in-work poverty in a european cross-country perspective," Documents de Travail de l'OFCE 2012-12, Observatoire Francais des Conjonctures Economiques (OFCE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp197

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Burns).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.