Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71317
Authors: 
Bargain, Olivier
Year of Publication: 
2010
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 10/32
Abstract: 
For policy makers and analysts, it is important to isolate the redistributive impact of tax-benefit policy changes from changes in the environment in which policies operate. When actual reforms are motivated by work incentives, it is also crucial to evaluate behavioural responses and the distributional consequences thereof. For that purpose, we embed counterfactual simulations in a formal framework based on the Shapley value decomposition and quantify the relative roles of (i) tax-benefit policy changes (direct policy effect), (ii) labour supply responses to the policy reforms (in- direct effect) and (iii) all other factors affecting income distribution over time. An application to the UK shows that the redistributive reforms of the 1998-2001 period have offset the increase in inequality that would have occurred otherwise. They also contribute to a strong decline in child poverty and poverty amongst single parent households. In the latter group, a third of the headcount poverty reduction (and half of the reduction in the depth of poverty) is on account of the very large incentive effect of policy changes.
Subjects: 
Tax-benefit policy
Inequality
Poverty
Shapley value decomposition
Labour supply
Behavioural microsimulation
JEL: 
H23
H53
I32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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