IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Decomposition analysis of distributive policies using behavioural simulations

  • Olivier Bargain

    ()

For policy makers and analysts, it is important to isolate the redistributive impact of tax-benefit reforms from changes in the environment in which policies operate. When actual reforms are motivated by work incentives, it is also crucial to evaluate behavioural responses and the distributional consequences thereof. For that purpose, I embed counterfactual simulations in a formal decomposition framework to quantify the relative roles of (i) direct tax-benefit policy changes, (ii) indirect policy effects due to labour supply responses to the reforms and (iii) all other factors affecting income distribution over time. An application to the UK shows that the redistributive reforms of the 1998–2001 period have offset much of the rise in market income inequality and contributed to a strong decline in child poverty and poverty amongst single parent households. In the latter group, a third of the headcount poverty reduction (and half of the reduction in the depth of poverty) is on account of the very large incentive effect of the policy changes. Copyright Springer Science+Business Media, LLC 2012

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://hdl.handle.net/10.1007/s10797-011-9203-y
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 19 (2012)
Issue (Month): 5 (October)
Pages: 708-731

as
in new window

Handle: RePEc:kap:itaxpf:v:19:y:2012:i:5:p:708-731
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  2. Blundell, Richard, 2000. "Work Incentives and 'In-Work' Benefit Reforms: A Review," Oxford Review of Economic Policy, Oxford University Press, vol. 16(1), pages 27-44, Spring.
  3. 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.
  4. Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, Daniela & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2005. "Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits," IZA Discussion Papers 1824, Institute for the Study of Labor (IZA).
  5. Jenkins, Stephen P. & Van Kerm, Philippe, 2004. "Accounting for income distribution trends: a density function decomposition approach," ISER Working Paper Series 2004-05, Institute for Social and Economic Research.
  6. Philippe Van Kerm, 2004. "What Lies Behind Income Mobility? Reranking and Distributional Change in Belgium, Western Germany and the USA," Economica, London School of Economics and Political Science, vol. 71(281), pages 223-239, 05.
  7. Andreas Peichl & Nico Pestel & Hilmar Schneider, 2012. "Does Size Matter? The Impact Of Changes In Household Structure On Income Distribution In Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(1), pages 118-141, 03.
  8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  9. Thor O. Thoresen, 2002. "Reduced Tax Progressivity in Norway in the Nineties The Effect from Tax Changes," Discussion Papers 335, Statistics Norway, Research Department.
  10. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  11. Bargain, Olivier, 2009. "The Distributional Effects of Tax-Benefit Policies under New Labour: A Shapley Decomposition," IZA Discussion Papers 4296, Institute for the Study of Labor (IZA).
  12. Keshab Bhattarai & John Whalley, 2009. "Redistributive Effects of Transfer Programmes in the United Kingdom," Economica, London School of Economics and Political Science, vol. 76(303), pages 413-431, 07.
  13. Richard Blundell & Mike Brewer & Peter Haan & Andrew Shephard, 2009. "Optimal Income Taxation of Lone Mothers: An Empirical Comparison of the UK and Germany," Economic Journal, Royal Economic Society, vol. 119(535), pages F101-F121, 02.
  14. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  15. 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.
  16. Bart Capéau & André De coster & Kris De Swerdt & Kristian Orsini, 2008. "Welfare effects of alternative financing of social security. Some calculations for Belgium," Center for Economic Studies - Discussion papers ces0812, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  17. 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.
  18. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
  19. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
  20. John Creedy & Guyonne Kalb, 2005. "Measuring Welfare Changes In Labour Supply Models," Manchester School, University of Manchester, vol. 73(6), pages 664-685, December.
  21. Andrew Leigh, 2005. "Optimal Design of Earned Income Tax Credits: Evidence from a British Natural Experiment," CEPR Discussion Papers 488, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  22. Dean R. Hyslop & David C. Maré, 2005. "Understanding New Zealand's Changing Income Distribution, 1983-1998: A Semi-parametric Analysis," Economica, London School of Economics and Political Science, vol. 72(3), pages 469-495, 08.
  23. Clemens Fuest & Judith Niehues & Andreas Peichl, 2010. "The Redistributive Effects of Tax Benefit Systems in the Enlarged EU," Public Finance Review, , vol. 38(4), pages 473-500, July.
  24. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
  25. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  26. Kolenikov, Stanislav & Shorrocks, Anthony, 2003. "A Decomposition Analysis of Regional Poverty in Russia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  27. 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.
  28. François Bourguignon & Francisco Ferreira & Phillippe Leite, 2008. "Beyond Oaxaca–Blinder: Accounting for differences in household income distributions," Journal of Economic Inequality, Springer, vol. 6(2), pages 117-148, June.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:19:y:2012:i:5:p:708-731. See general information about how to correct material in RePEc.

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

or (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.