IDEAS home Printed from https://ideas.repec.org/p/hdl/improv/1406.html
   My bibliography  Save this paper

Estimating the poverty reduction effect of tax and benefit policies in Finland 1993-2013 using a microsimulation method

Author

Listed:
  • Pasi Moisio
  • Kirsi-Marja Lehtelä
  • Susanna Mukkila

Abstract

The poverty risk rate increased in Finland from 7 to 14 per cent between 1993 and 2010. We have estimated the counterfactual poverty rates for the year 2010 in order to evaluate the impact of changes in tax and benefit systems on the increase of the poverty risk rate. Household disposable incomes are simulated by using the same households of the year 2010 data, but varying the annual taxation and benefit legislation covering the years 1993-2013. The method used is inspired by the Shorrocks-Shapley decomposition method. The benefit cuts after the 1990s depression had a rather modest impact on poverty risk rates and the impact was nullified during 2000s by series of benefit raises. Changes in taxation had a considerably larger impact on the poverty risk rate. The poverty risk rate would be 2.5 percentage points lower if the tax legislation were the same in 2010 as it was in 1993. Furthermore, the level of benefits has decreased compared to the average income level. If the level of benefits would have remained at the same level compared to the average earnings in 2010 as in 1993, the poverty risk rate would be four percentage points lower in 2010. The policy of non-action with social transfers can have a major impact on the relative adequacy and on the poverty reduction effect of social transfers in the long-run.

Suggested Citation

  • Pasi Moisio & Kirsi-Marja Lehtelä & Susanna Mukkila, 2014. "Estimating the poverty reduction effect of tax and benefit policies in Finland 1993-2013 using a microsimulation method," ImPRovE Working Papers 14/06, Herman Deleeck Centre for Social Policy, University of Antwerp.
  • Handle: RePEc:hdl:improv:1406
    as

    Download full text from publisher

    File URL: http://www.centrumvoorsociaalbeleid.be/ImPRovE/Working%20Papers/ImPRovE%20WP%201406_1.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Olivier Bargain & Tim Callan, 2010. "Analysing the effects of tax-benefit reforms on income distribution: a decomposition approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(1), pages 1-21, March.
    2. François Bourguignon & Amedeo Spadaro, 2006. "Microsimulation as a tool for evaluating redistribution policies," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 77-106, April.
    3. Manos Matsaganis & Chrysa Leventi, 2014. "Distributive Effects of the Crisis and Austerity in Seven EU Countries," ImPRovE Working Papers 14/04, Herman Deleeck Centre for Social Policy, University of Antwerp.
    4. Callan, Tim & Leventi, Chrysa & Levy, Horacio & Matsaganis, Manos & Paulus, Alari & Sutherland, Holly, 2011. "The distributional effects of austerity measures: a comparison of six EU countries," EUROMOD Working Papers EM6/11, EUROMOD at the Institute for Social and Economic Research.
    5. Matsaganis, Manos & O'Donoghue, Cathal & Levy, Horacio & Coromaldi, Manuela & Mercader-Prats, M. & Rodrigues, Carlos Farinha & Toso, Stefano & Tsakloglou, Panos, 2004. "Child poverty and family transfers in Southern Europe," EUROMOD Working Papers EM2/04, EUROMOD at the Institute for Social and Economic Research.
    6. Jekaterina Navicke & Olga Rastrigina & Holly Sutherland, 2014. "Nowcasting Indicators of Poverty Risk in the European Union: A Microsimulation Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(1), pages 101-119, October.
    7. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    tax-benefit policy; social policy; poverty; microsimulation; counterfactual; decomposition; Finland;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D3 - Microeconomics - - Distribution
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hdl:improv:1406. 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: (Tim Goedemé). General contact details of provider: http://edirc.repec.org/data/csbuabe.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.