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The Distributive Impact of the Luxembourg Tax-Benefit System: A More Comprehensive Measurement

Author

Listed:
  • Vincent Vergnat
  • Conchita D’Ambrosio
  • Philippe Liégeois

Abstract

This article studies the distribution of income in Luxembourg by integrating two aspects that have been previously neglected: indirect taxation and in-kind transfers. The integration of the latter is essential in Luxembourg, the country with the highest public expenditure per capita in the Organisation for Economic Co-operation and Development (OECD). These issues have been understudied because of some methodological challenges, including the lack of data containing all the necessary information for this type of analysis. However, with the EUROMOD microsimulation model, different data sources, and imputation methods, we are able to obtain a more complete view of the income distribution in Luxembourg. We find that, as in many developed countries, indirect taxes are regressive. On the other hand, in-kind transfers play an important role in reducing income inequality, in particular through education and health services.

Suggested Citation

  • Vincent Vergnat & Conchita D’Ambrosio & Philippe Liégeois, 2022. "The Distributive Impact of the Luxembourg Tax-Benefit System: A More Comprehensive Measurement," Public Finance Review, , vol. 50(4), pages 436-483, July.
    • Handle: RePEc:sae:pubfin:v:50:y:2022:i:4:p:436-483
    DOI: 10.1177/10911421221113842
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    References listed on IDEAS

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    1. M Luisa Maitino & Letizia Ravagli & Nicola Sciclone, 2017. "Microreg: A Traditional Tax-Benefit Microsimulation Model Extended To Indirect Taxes And In Kind Transfers," International Journal of Microsimulation, International Microsimulation Association, vol. 10(1), pages 5-38.
    2. François Marical & Marco Mira d'Ercole & Maria Vaalavuo & Gerlinde Verbist, 2008. "Publicly provided services and the distribution of households' economic resources," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-38.
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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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