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Income inequality and fiscal redistribution in 47 LIS-countries, 1967-2014

Author

Listed:
  • Koen Caminada
  • Jinxian Wang
  • Kees Goudswaard
  • Chen Wang

Abstract

In most OECD countries the gap between rich and poor has widened over the past decades. This paper analyzes whether and to what extent taxes and social transfers have contributed to this trend. Has the redistributive power of different social programs changed over time? The paper contributes to the literature by disentangling several parts of fiscal redistribution in a comparative setting for the period 1967-2014. We use micro-data from the Luxembourg Income Study (LIS) to examine household primary income inequality and disposable income inequality, redistribution from transfers and income taxes, and the underlying social programs that drive the changes. We offer detailed information of fiscal redistribution in 47 countries for the period 1967-2014, employing data that have been computed from LIS. LIS data are detailed enough to allow us to measure both overall redistribution, and the partial effects of redistribution by several taxes or transfers. We elaborate on the work of Jesuit and Mahler (2004) and Wang et al (2012 and 2014), and we refine, update and extend the Fiscal Redistribution approach. LIS data allow us to decompose the trajectory of the Gini coefficient from primary to disposable income inequality in several parts (i.e. 9 different benefits and income taxes and social contributions). The update and extension of the Leiden LIS Budget Incidence Fiscal Redistribution Dataset on Income Inequality (LLBIFR Dataset on Income Inequality 2017) allows researchers and public policy analysts to compare fiscal redistribution across developed countries and middle income countries over the last five decades. Research may employ these data in addressing several important research issues. Among the most commonly addressed questions in the empirical literature on the welfare state concerns the sources of variance across countries and over time in the extent and nature of fiscal redistribution. Changes (in the generosity) of welfare states can be linked to changes in the fiscal redistribution. Best-practice among countries can be identified and analyzed in more detail. In exploring the causes and effects of welfare state redistribution in the developed world, the literature has increasingly moved towards more disaggregated measures of social policy, an enterprise in which the LLBIFR on Income Inequality 2017, with its detailed data on taxes and a large number of individual social benefits, offers a rich source of information, which may be used by scholars and policy analysts to study the effects of different social programs on economic well-being.

Suggested Citation

  • Koen Caminada & Jinxian Wang & Kees Goudswaard & Chen Wang, 2017. "Income inequality and fiscal redistribution in 47 LIS-countries, 1967-2014," LIS Working papers 724, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:724
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    References listed on IDEAS

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    Cited by:

    1. Victor Amoureux & Elvire Guillaud & Michaël Zemmour, 2019. "It Takes Two to Tango Income and Payroll Taxes in Progressive Tax Systems," Working Papers hal-02735278, HAL.
    2. Jaejoon Woo, 2023. "The long-run determinants of redistribution: evidence from a panel of 47 countries in 1967–2014," Empirical Economics, Springer, vol. 64(4), pages 1811-1860, April.
    3. Heise, Arne & Serfraz Khan, Ayesha, 2018. "The welfare state and liberal democracy: A political economy approach," ZÖSS-Discussion Papers 71, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    4. Victor Amoureux & Elvire Guillaud & Michaël Zemmour, 2019. "It Takes Two to Tango Income and Payroll Taxes in Progressive Tax Systems," SciencePo Working papers Main hal-02735278, HAL.
    5. Bruno Bises & Francesco Bloise & Antonio ScialÃ, 2021. "Functional income distribution, inequality and the effectiveness of fiscal redistribution: evidence from OECD countries," Public Finance Research Papers 49, Istituto di Economia e Finanza, DSGE, Sapienza University of Rome.
    6. 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.
    7. Woo, Jaejoon, 2023. "Financial crises and inequality: New evidence from a panel of 17 advanced economies," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    8. 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.
    9. Mr. David Coady & Devin D'Angelo & Brooks Evans, 2019. "Fiscal Redistribution and Social Welfare," IMF Working Papers 2019/051, International Monetary Fund.
    10. Bruno Bises & Francesco Bloise & Antonio Scialà, 2024. "Labor share as an "automatic stabilizer" of income inequality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 511-532, April.
    11. Yixia Cai & Martin Evans, 2018. "Informal Transfers in Comparisons of Income Distributions: Lessons from Rich and Middle-Income Countries," Journal of Income Distribution, Ad libros publications inc., vol. 26(2), pages 1-20, July.
    12. Koen Caminada & Jinxian Wang & Kees Goudswaard & Chen Wang, 2019. "Relative Income Poverty Rates and Poverty Alleviation via Tax/benefit Systems in 49 LIS-Countries, 1967-2016," LIS Working papers 761, LIS Cross-National Data Center in Luxembourg.
    13. Coady, David & D’Angelo, Devin & Evans, Brooks, 2020. "Fiscal redistribution and social welfare: doing more or more to do?," EUROMOD Working Papers EM10/20, EUROMOD at the Institute for Social and Economic Research.

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    More about this item

    Keywords

    welfare states; social income transfers; inequality; Gini coefficient; LIS;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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