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Income redistribution through taxes and social benefits: the case of Slovenia and Croatia

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  • Cok, Mitja
  • Urban, Ivica
  • Verbič, Miroslav

Abstract

The article analyses the redistributive effect attained by personal income tax, social security contributions and social benefits in Slovenia and Croatia. The redistributive effect is decomposed first to reveal progressivity and horizontal inequity effects, and further to show contributions of different tax and benefit instruments. Even though both countries started from the same socioeconomic background two decades ago, the current results reveal divergence that is a consequence of diverse development during this period. The results indicate that Croatia experienced significantly higher pre-fiscal income inequality and lower redistributive effect than Slovenia. Horizontal inequity effects, though, were higher in Slovenia than in Croatia. In both countries, the means-tested social benefits exerted an over-proportionate influence on vertical effects, suggesting a strong impact of the welfare state on income position of their residents, but also induced a large amount of horizontal inequity. In Slovenia, the non-means-tested benefits slightly increased income inequality.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38918.

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Date of creation: Feb 2012
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Handle: RePEc:pra:mprapa:38918

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Keywords: redistributive effect; horizontal inequity; taxes and benefits; decomposition; Slovenia; Croatia;

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References

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  1. Duclos, J.Y. & Jalbert, V. & Araar, A., 2000. "Classical Horizontal Inequity and Reranking: an Integrated Approach," Papers 0002, Laval - Recherche en Politique Economique.
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Cited by:
  1. Carlos Farinha Rodrigues & Isabel Andrade, 2013. "Robin Hood versus Piggy Bank: Income redistribution in Portugal 2006-10," Working Papers Department of Economics 2013/28, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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