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The contribution of government transfer programs to inequality.A net-benefit approach

Author

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  • Alvaro Forteza

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Ianina Rossi

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

The contribution of government transfer programs to inequality is often assessed by analyzing to what extent the benefits paid go to lower income families. Several analysts have found that some key government transfers actually go mostly to middle and high income families and thus contribute to greater inequality. We argue in this paper that the impact of these programs on inequality should be evaluated considering the benefits received net of the taxes paid by households to finance the programs, since higher income households receive higher benefits but they also pay higher taxes. We illustrate this approach by estimating the impact of four government programs on inequality in Uruguay and show that the conclusions are different depending on whether we use gross or net benefits in the estimation.

Suggested Citation

  • Alvaro Forteza & Ianina Rossi, 2006. "The contribution of government transfer programs to inequality.A net-benefit approach," Documentos de Trabajo (working papers) 0606, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:0606
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    File URL: https://hdl.handle.net/20.500.12008/2048
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    References listed on IDEAS

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    1. Atkinson, Anthony B., 2000. "Increased Income Inequality in OECD Countries and the Redistributive Impact of the Government Budget," WIDER Working Papers 295534, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
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    7. Miriam Beblo & Thomas Knaus, 2001. "Measuring Income Inequality in Euroland," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(3), pages 301-333, September.
    8. Ann Harding & Richard Percival & Deborah Schofield & Agnes Walker, 2002. "The Lifetime Distributional Impact of Government Health Outlays," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(4), pages 363-379, December.
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    10. Andrew Mason & Ronald Lee & An-Chi Tung & Mun-Sim Lai & Tim Miller, 2009. "Population Aging and Intergenerational Transfers: Introducing Age into National Accounts," NBER Chapters, in: Developments in the Economics of Aging, pages 89-122, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Zhang, Muyang & Zhou, Guangsu & Fan, Gang, 2020. "Political Control and Economic Inequality: Evidence from Chinese Cities," China Economic Review, Elsevier, vol. 61(C).
    2. Alvaro Forteza & Irene Mussio, 2012. "Assessing Redistribution in the Uruguayan Social Security System," Journal of Income Distribution, Ad libros publications inc., vol. 21(1), pages 65-87, March.
    3. Alvaro Forteza, 2011. "Assessing Redistribution within Social Insurance Systems.The cases of Argentina, Brazil, Chile, Mexico and Uruguay," Documentos de Trabajo (working papers) 1311, Department of Economics - dECON.
    4. Siham MATALLAH & Lahouari BENLAHCENE & Amal MATALLAH, 2022. "Government subsidies and income inequality in Algeria: An analytical and empirical study," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(633), W), pages 147-162, Winter.
    5. Ferreira de Mendonça, Helder & Martins Esteves, Diogo, 2014. "Income inequality in Brazil: What has changed in recent years?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.

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    More about this item

    Keywords

    Transfers; inequality; redistribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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