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Comparing Government Redistribution across Countries: The Problem of Second-order Effects

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  • Vincent Mahler
  • David Jesuit

Abstract

The traditional way of measuring government redistribution across countries is to compare the income households report that they receive from private sources with the income they receive after government transfers have been added and taxes and social insurance contributions deducted. Unfortunately, this conventional measure does not capture “second order” effects whereby income guarantees arising from public pensions make it less necessary for people to save for their retirement, rendering the “pre-government” counterfactual to the observed post-government distribution unrealistic. In addressing this problem, we offer an alternative to the conventional direct redistribution measure that considers claims to future income generated by both the public and the private sectors. Data have been calculated for 51 country-years from household income surveys available from the Luxembourg Income Study.

Suggested Citation

  • Vincent Mahler & David Jesuit, 2010. "Comparing Government Redistribution across Countries: The Problem of Second-order Effects," LIS Working papers 546, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:546
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    1. Robert Plotnick, 1984. "The Redistributive Impact of Cash Transfers," Public Finance Review, , vol. 12(1), pages 27-50, January.
    2. Frederick Solt, 2008. "Economic Inequality and Democratic Political Engagement," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 48-60, January.
    3. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
    4. Lane Kenworthy & Jonas Pontusson, 2005. "Rising Inequality and the Politics of Redistribution in Affluent Countries," LIS Working papers 400, LIS Cross-National Data Center in Luxembourg.
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    Cited by:

    1. Koen Caminada & Chen Wang, 2011. "Disentangling Income Inequality and the Redistributive Effect of Social Transfers and Taxes in 36 LIS Countries," LIS Working papers 567, LIS Cross-National Data Center in Luxembourg.
    2. Orsetta Causa & Mikkel Hermansen, 2018. "Income Redistribution Through Taxes and Transfers across OECD Countries," LIS Working papers 729, LIS Cross-National Data Center in Luxembourg.
    3. Elvire Guillaud & Matthew Olckers & Michaël Zemmour, 2020. "Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 444-466, June.
    4. Malte Luebker, 2014. "Income Inequality, Redistribution, and Poverty: Contrasting Rational Choice and Behavioral Perspectives," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 133-154, March.
    5. Orsetta Causa & Mikkel Hermansen, 2017. "Income redistribution through taxes and transfers across OECD countries," OECD Economics Department Working Papers 1453, OECD Publishing.
    6. Bernhard Hammer & Michael Christl & Silvia De Poli, 2020. "Redistribution across Europe: How much and to whom?," Working Papers 593, ECINEQ, Society for the Study of Economic Inequality.
    7. Koen Caminada & Kees Goudswaard & Chen Wang & Jinxian Wang, 2019. "Income Inequality and Fiscal Redistribution in 31 Countries After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 119-148, March.
    8. Frederick Solt, 2020. "Measuring Income Inequality Across Countries and Over Time: The Standardized World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 101(3), pages 1183-1199, May.
    9. Gerlinde Verbist & Ron Diris & Frank Vandenbroucke, 2018. "Solidarity between generations in extended families. Direction, size and intensity," Working Papers 1816, Herman Deleeck Centre for Social Policy, University of Antwerp.
    10. Schaffrin, André & Reibling, Nadine, 2015. "Household energy and climate mitigation policies: Investigating energy practices in the housing sector," Energy Policy, Elsevier, vol. 77(C), pages 1-10.
    11. IVASKAITE-TAMOSIUNE Viginta & THIEMANN Andreas, 2021. "The budgetary and redistributive impact of pension taxation in the EU: A microsimulation analysis," JRC Working Papers on Taxation & Structural Reforms 2021-08, Joint Research Centre.
    12. Malte Luebker, 2014. "Income Inequality, Redistribution, and Poverty: Contrasting Rational Choice and Behavioral Perspectives," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 133-154, March.
    13. repec:ilo:ilowps:471001 is not listed on IDEAS
    14. repec:osf:socarx:mwnje_v1 is not listed on IDEAS
    15. Ali T. Cem Başlevent, 2014. "Social Transfers and Income Inequality in Turkey: How Informative Is the Survey of Income and Living Conditions?," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(3), pages 23-42, September.
    16. Solt, Frederick, 2019. "Measuring Income Inequality Across Countries and Over Time: The Standardized World Income Inequality Database," SocArXiv mwnje, Center for Open Science.
    17. 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).
    18. Rafael Carranza & Brian Nolan, 2024. "Assessing income redistribution: what are the key analytic choices?," Fiscal Studies, John Wiley & Sons, vol. 45(4), pages 501-519, December.
    19. Federico Podestà & Sonia Marzadro, 2017. "Operationalizing De-commodification and De-familization Outcomes via the Relative Poverty Approach: An Application to Western European Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(2), pages 701-726, March.
    20. Cem Baslevent, 2016. "Social Transfers and Income Inequality in Turkey: How Important is the Gender Dimension?," Working Papers 1013, Economic Research Forum, revised Jun 2016.
    21. repec:unu:wpaper:wp2012-44 is not listed on IDEAS

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