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Title:The redistributive effects of tax benefit systems in the enlarged EU PDF Logo
Authors:Fuest, Clemens
Niehues, Judith
Peichl, Andreas
Issue Date:2009
Series/Report no.:IZA Discussion Papers 4520
Abstract:How do different components of the tax and transfer systems affect disposable income inequality? This paper explores the redistributive effects of different tax benefit instruments in the enlarged EU based on two approaches. Inequality analysis based on the standard approach suggests that benefits are the most important factor reducing inequality in the majority of countries. The factor source decomposition approach, however, suggests that benefits play a negligible role and sometimes even contribute slightly positive to inequality. On the contrary, here taxes and social contributions are by far the most important contributors to income inequality reduction. We explain these partly contradictory results with the different normative focus of the two approaches and show that benefits have other aims than redistribution. Finally, our country clustering shows that the Eastern European countries do not form a distinguished group. The Central Eastern European countries group together with the Continental European countries and the Baltic States show similarities with some Southern European countries.
Subjects:Inequality
redistribution
decomposition
tax benefit systems
JEL:D31
D60
H20
Persistent Identifier of the first edition:urn:nbn:de:101:1-20091105910
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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