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Income Redistribution through Taxes and Social Benefits: The Case of Slovenia and Croatia

Mitja ÄŒok (), Ivica Urban () and Miroslav VerbiÄ ()
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Mitja ÄŒok: Faculty of Economics, University of Ljubljana, Slovenia
Miroslav VerbiÄ: Faculty of Economics, University of Ljubljana, Slovenia

Authors registered in the RePEc Author Service: Miroslav Verbič ()

Panoeconomicus, 2013, vol. 60, issue 5, 667-686

Abstract: The article analyses the redistributive effect attained by personal income tax, social security contributions and social benefits in Slovenia and Croatia. The redistributive effect is decomposed first to reveal progressivity and horizontal inequity effects, and further to show contributions of different tax and benefit instruments. Even though both countries started from the same socioeconomic background two decades ago, the current results reveal divergence that is a consequence of diverse development during this period. The results indicate that Croatia experienced significantly higher pre-fiscal income inequality and lower redistributive effect than Slovenia. Horizontal inequity effects, though, were higher in Slovenia than in Croatia. In both countries, the means-tested social benefits exerted an over-proportionate influence on the vertical effect, suggesting a strong impact of the welfare state on income position of their residents, but also induced a large amount of horizontal inequity. In Slovenia, the non-means-tested benefits slightly increased income inequality.

Keywords: Redistributive effect; Horizontal inequity; Taxes and benefits; Decomposition; Slovenia; Croatia (search for similar items in EconPapers)
JEL-codes: D31 D33 H23 H24 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Income redistribution through taxes and social benefits: the case of Slovenia and Croatia (2012) Downloads
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Handle: RePEc:voj:journl:v:60:y:2013:i:5:p:667-686