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The Distributional Effects of Tax-benefit Policies under New Labour - A Shapley Decomposition

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  • Olivier Bargain

    (University College Dublin)

Abstract

Using counterfactual microsimulations, Shapley decompositions of time change in inequality and poverty indices make it possible to disentangle and quantify the relative effect of tax-benefit policy changes, compared to all other effects including shifts in the distribution of market income. Using this approach also helps to clarify the different issues underlying the distributional evaluation of policy reforms. An application to the UK (1998-2001) confirms previous findings that inequality and depth of poverty would have increased under the first New Labour government, had important reforms like the extensions of income support and tax credits not been implemented. These reforms have also contributed to substantially reduce poverty among families with children and pensioners.

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File URL: http://www.ucd.ie/t4cms/wp09.07.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200907.

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Length: 21 pages
Date of creation: 06 Feb 2009
Date of revision:
Handle: RePEc:ucn:wpaper:200907

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Keywords: Tax-benefit policy; inequality; poverty; Shapley decomposition; microsimulation;

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Cited by:
  1. John Creedy & Nicolas Hérault, 2011. "Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics," Melbourne Institute Working Paper Series wp2011n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Eric Wong & Andrew Tsang & Steven Kong, 2014. "How Does Loan-To-Value Policy Strengthen Banks' Resilience to Property Price Shocks - Evidence from Hong Kong," Working Papers 032014, Hong Kong Institute for Monetary Research.
  3. Olivier Bargain, 2012. "Decomposition analysis of distributive policies using behavioural simulations," International Tax and Public Finance, Springer, vol. 19(5), pages 708-731, October.

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