Back to the future - decomposition analysis of distributive policies using behavioural simulations
For policy makers and analysts, it is important to isolate the redistributive impact of tax-benefit policy changes 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, we embed counterfactual simulations in a formal framework based on the Shapley value decomposition and quantify the relative roles of (i) tax-benefit policy changes (direct policy effect), (ii) labour supply responses to the policy reforms (in- direct effect) 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 the increase in inequality that would have occurred otherwise. They also contribute 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 policy changes.
|Date of creation:||Oct 2010|
|Contact details of provider:|| Postal: UCD, Belfield, Dublin 4|
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
More information through EDIRC
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.:
- Van Kerm, Philippe, 2003.
"What Lies Behind Income Mobility? Reranking and Distributional Change in Belgium, Western Germany and the USA,"
IRISS Working Paper Series
2003-03, IRISS at CEPS/INSTEAD.
- 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.
- 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 410-442, June.
When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:201032. 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: (Nicolas Clifton)
If references are entirely missing, you can add them using this form.