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An extended view on inequality and redistribution in the European Union — The role of indirect taxation and in-kind benefits

Author

Listed:
  • Christl, Michael
  • De Poli, Silvia
  • Köppl–Turyna, Monika

Abstract

This paper extends the concept of disposable income by including in-kind benefits provided by the government for education and health services, as well as imputed VAT payments, following Figari and Paulus (2015). Our analysis shows that the inclusion of these elements significantly reduces income inequality, as evidenced by a decrease in the Gini coefficient in all countries analysed. While direct taxes and cash transfers are the main drivers of redistribution, in-kind transfers also play a significant role, while VAT has a smaller negative impact. Our study shows that an additional broadening of the income concept also increases the targeting of the tax-benefit system towards low-income households, but to a very different extent across EU Member States. Our new, broader approach allows for a more accurate assessment of redistribution and cross-country comparisons, providing valuable insights for policy evaluation at the EU level.

Suggested Citation

  • Christl, Michael & De Poli, Silvia & Köppl–Turyna, Monika, 2025. "An extended view on inequality and redistribution in the European Union — The role of indirect taxation and in-kind benefits," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 162-177.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:162-177
    DOI: 10.1016/j.eap.2025.05.001
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    1. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04316442, HAL.
    2. Christl, Michael & Köppl–Turyna, Monika & Lorenz, Hanno & Kucsera, Dénes, 2020. "Redistribution within the tax-benefits system in Austria," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 250-264.
    3. Michael Christl & Monika Köppl‐Turyna, 2025. "Net Fiscal Contributions in the EU—The Role of Indirect Taxation and In‐Kind Benefits," Kyklos, Wiley Blackwell, vol. 78(4), pages 1607-1636, November.
    4. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    5. Holly Sutherland, 2007. "Model 10: EUROMOD — The Tax-Benefit Microsimulation Model for the European Union," International Symposia in Economic Theory and Econometrics, in: Modelling Our Future: Population Ageing, Health and Aged Care, pages 483-488, Emerald Group Publishing Limited.
    6. Alari Paulus & Holly Sutherland & Panos Tsakloglou, 2010. "The distributional impact of in-kind public benefits in European countries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(2), pages 243-266.
    7. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Post-Print hal-04316442, HAL.
    8. Michael Christl & Andrea Papini & Alberto Tumino, 2022. "Who Pays More? Heterogeneity in Effective VAT Rates Across Native and Migrant Households," Scienze Regionali, Società editrice il Mulino, issue Speciale, pages 67-98.
    9. Christl, Michael & De Poli, Silvia & Köppl-Turyna, Monika, 2025. "Does redistribution hurt growth? An empirical assessment of the redistribution–growth relationship in the European Union," Economic Modelling, Elsevier, vol. 149(C).
    10. Francesco Figari & Alari Paulus, 2015. "The Distributional Effects of Taxes and Transfers Under Alternative Income Concepts," Public Finance Review, , vol. 43(3), pages 347-372, May.
    11. Holly Sutherland & Anil Gupta & Ann Harding, 2007. "Model 10: EUROMOD — The Tax-Benefit Microsimulation Model for the European Union," International Symposia in Economic Theory and Econometrics, in: Modelling Our Future: Population Ageing, Health and Aged Care, pages 483-488, Emerald Group Publishing Limited.
    12. Hammer, Bernhard & Christl, Michael & De Poli, Silvia, 2023. "Public redistribution in Europe: Between generations or income groups?," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    13. Blasco, Julien & Guillaud, Elvire & Zemmour, Michaël, 2023. "The inequality impact of consumption taxes: An international comparison," Journal of Public Economics, Elsevier, vol. 222(C).
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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