Herwig Immervoll () (University of Cambridge, OECD, European Centre Vienna and IZA Bonn) Horacio Levy () (University of Essex) Christine Lietz () (University of Cambridge) Daniela Manotvani () (University of Cambridge and Prometeia, Bologna) Cathal O’Donoghue () (National University of Ireland, Galway, CHILD and IZA Bonn) Holly Sutherland () (University of Essex and DIW Berlin) Gerlinde Verbist () (University of Antwerp)
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The systems of direct taxes and cash benefits in the Member States of the European Union vary considerably in size and structure. We explore their direct impacts on cross-sectional income inequality (termed "redistributive effect" for the purpose of this paper) using EUROMOD, a tax-benefit microsimulation model for the European Union. This relies on harmonised household micro-data representative of each national population together with simulations of entitlements to cash benefits and liabilities for taxes and social contributions. It allows us to draw a more comprehensive - and comparable - picture of the combined effects of transfers and taxes than is usually possible. We decompose the redistributive effect of taxbenefit systems to assess and compare the effectiveness of individual policies at reducing income disparities. The following categories of benefits and taxes are considered both individually and in combination: income taxes, social contributions, cash benefits designed to target the poor or redistribute inter-personally (through means-testing) as well as cash benefits intended to redistribute intra-personally across the lifecycle (through social insurance or contingency-based entitlement). We derive results for the 15 "old" members of the European Union and present them for each country separately as well as for the EU-15 as a whole.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
1824.
Find related papers by JEL classification: C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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