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Title:Household incomes and redistribution in the European Union: quantifying the equalising properties of taxes and benefits PDF Logo
Authors:Immervoll, Herwig
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1824
Abstract:The systems of direct taxes and cash benefits in the Member States of the European Union vary considerably in size and structure. We explore their direct impacts on cross-sectional income inequality (termed redistributive effect for the purpose of this paper) using EUROMOD, a tax-benefit microsimulation model for the European Union. This relies on harmonised household micro-data representative of each national population together with simulations of entitlements to cash benefits and liabilities for taxes and social contributions. It allows us to draw a more comprehensive and comparable picture of the combined effects of transfers and taxes than is usually possible. We decompose the redistributive effect of tax-benefit systems to assess and compare the effectiveness of individual policies at reducing income disparities. The following categories of benefits and taxes are considered both individually and in combination: income taxes, social contributions, cash benefits designed to target the poor or redistribute inter-personally (through means-testing) as well as cash benefits intended to redistribute intra-personally across the lifecycle (through social insurance or contingency-based entitlement). We derive results for the 15 old members of the European Union and present them for each country separately as well as for the EU-15 as a whole.
Subjects:income inequality
redistribution
microsimulation
European Union
JEL:C81
D31
H22
H55
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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