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A re-examination of welfare states and inequality in rich nations: How in-kind transfers and indirect taxes change the story

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  • Irwin Garfinkel

    (Columbia University School of Social Work, New York)

  • Lee Rainwater

    (Harvard University)

  • Timothy M. Smeeding

    (Syracuse University)

Abstract

Previous studies find large crossnational differences in inequality amongst rich Western nations, due in large part to differences in the generosity of welfare state transfers. The United States is the least generous nation and the one having the most aftertax and transfer inequality. But these analyses are limited to the effects of cash and nearcash transfers and direct taxes on incomes, while on average, half of welfare state transfers in rich nations are inkind benefits-health insurance, education, and other services. Counting inkind benefits at government cost and accounting for the indirect taxes used to finance transfers substantially reduces crossnational differences in inequality at the bottom of the income distribution. The findings have implications for how we think about tradeoffs across welfare state domains that all nations face and we illustrate this with reference to the current U.S. debate about health insurance. © 2006 by the Association for Public Policy Analysis and Management

Suggested Citation

  • Irwin Garfinkel & Lee Rainwater & Timothy M. Smeeding, 2006. "A re-examination of welfare states and inequality in rich nations: How in-kind transfers and indirect taxes change the story," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 25(4), pages 897-919.
  • Handle: RePEc:wly:jpamgt:v:25:y:2006:i:4:p:897-919 DOI: 10.1002/pam.20213
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    4. William Duncombe & John Yinger, 1997. "Why is it so hard to help central city schools?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 85-113.
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