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An extended view on inequality and redistribution in the European Union - The role of indirect taxation and in-kind benefits

Author

Listed:
  • Christl, Michael
  • De Poli, Silvia
  • Köppl-Turyna, Monika

Abstract

This paper refines the concept of disposable income by incorporating governmentprovided in-kind benefits for education and health services, as well as imputed VAT payments, following Figari and Paulus (2015). Our analysis reveals that including these elements significantly reduces income inequality, as seen in a decrease in the Gini coefficient across all examined countries. While direct taxes and cash benefits are the main drivers of redistribution, in-kind benefits also play a substantial role, while VAT having a smaller, negative impact. Our study highlights that additionally extending the income concept increases also the targeting of the tax benefit system to low-income households, however to a very different extend across the EU Member States. Our new, broader approach allows for more accurate assessments of redistribution and cross-country comparisons, offering valuable insights for EU-level policy evaluations.

Suggested Citation

  • Christl, Michael & De Poli, Silvia & Köppl-Turyna, Monika, 2024. "An extended view on inequality and redistribution in the European Union - The role of indirect taxation and in-kind benefits," GLO Discussion Paper Series 1508, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1508
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    References listed on IDEAS

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    1. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Post-Print hal-04316442, HAL.
    2. Christl, Michael & De Poli, Silvia & Köppl-Turyna, Monika, 2025. "Does redistribution hurt growth? An empirical assessment of the redistribution–growth relationship in the European Union," Economic Modelling, Elsevier, vol. 149(C).
    3. Michael Christl & Monika Köppl‐Turyna, 2025. "Net Fiscal Contributions in the EU—The Role of Indirect Taxation and In‐Kind Benefits," Kyklos, Wiley Blackwell, vol. 78(4), pages 1607-1636, November.
    4. Alari Paulus & Holly Sutherland & Panos Tsakloglou, 2010. "The distributional impact of in-kind public benefits in European countries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(2), pages 243-266.
    5. Holly Sutherland & Anil Gupta & Ann Harding, 2007. "Model 10: EUROMOD — The Tax-Benefit Microsimulation Model for the European Union," International Symposia in Economic Theory and Econometrics, in: Modelling Our Future: Population Ageing, Health and Aged Care, pages 483-488, Emerald Group Publishing Limited.
    6. Michael Christl & Andrea Papini & Alberto Tumino, 2022. "Who Pays More? Heterogeneity in Effective VAT Rates Across Native and Migrant Households," Scienze Regionali, Società editrice il Mulino, issue Speciale, pages 67-98.
    7. Christl, Michael & Köppl–Turyna, Monika & Lorenz, Hanno & Kucsera, Dénes, 2020. "Redistribution within the tax-benefits system in Austria," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 250-264.
    8. 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).
    9. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04316442, HAL.
    10. Francesco Figari & Alari Paulus, 2015. "The Distributional Effects of Taxes and Transfers Under Alternative Income Concepts," Public Finance Review, , vol. 43(3), pages 347-372, May.
    11. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    12. Holly Sutherland, 2007. "Model 10: EUROMOD — The Tax-Benefit Microsimulation Model for the European Union," International Symposia in Economic Theory and Econometrics, in: Modelling Our Future: Population Ageing, Health and Aged Care, pages 483-488, Emerald Group Publishing Limited.
    13. Blasco, Julien & Guillaud, Elvire & Zemmour, Michaël, 2023. "The inequality impact of consumption taxes: An international comparison," Journal of Public Economics, Elsevier, vol. 222(C).
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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