Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits

Herwig Immervoll, Horacio Levy, Christine Lietz (), Daniela Mantovani (), Cathal O'Donoghue, Holly Sutherland and Gerlinde Verbist ()
Additional contact information
Christine Lietz: IHS - Institute for Advanced Studies, Vienna
Daniela Mantovani: University of Modena and Reggio Emilia
Gerlinde Verbist: University of Antwerp

No 1824, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: microsimulation; redistribution; income inequality; European Union (search for similar items in EconPapers)
JEL-codes: C81 D31 H22 H55 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005-10
New Economics Papers: this item is included in nep-eec and nep-pbe
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Citations: View citations in EconPapers (34)

Published - published in: Papadimitriou, D.B. (ed.), The Distributional Effects of Government Spending and Taxation, Palgrave MacMillan 2006

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Related works:
Chapter: Household Incomes and Redistribution in the European Union: Quantifying the Equalizing Properties of Taxes and Benefits (2006)
Working Paper: Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits (2006)
Working Paper: Household incomes and redistribution in the European Union: quantifying the equalising properties of taxes and benefits (2005)
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