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Four levers of redistribution: The impact of tax and transfer systems on inequality reduction

Elvire Guillaud (), Matthew Olckers and Michaël Zemmour ()

No 695, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: Using observational micro data from the Luxembourg Income Study (LIS) we assess the redistributive impact of tax and transfer con_gurations across 22 OECD countries for the period 1999-2013. After imputing missing tax data (employer social security contributions), we measure the reduction of income inequality due to four key levers of tax and transfer systems: the average tax rate, tax progressivity, the average transfer rate, and transfer targeting. Our methodological improvements provide the following results: First, tax redistribution dominates transfer redistribution (excluding pensions) in most countries. Second, targeting explains very little of the cross-country variation in inequality reduction. In contrast, both progressivity of taxes and the average tax rate have large impacts on redistribution. Third, we observe the trace of political trade-o_s. High average tax rates do not appear in conjunction with highly progressive tax systems.

Keywords: tax-benefit policies; social security contributions; inequality reduction (search for similar items in EconPapers)
JEL-codes: D31 H30 I38 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-07
New Economics Papers: this item is included in nep-eur and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in Review of Income and Wealth, 66, (2020): 444-466. https://doi.org/10.1111/roiw.12408

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Related works:
Journal Article: Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction (2020) Downloads
Working Paper: Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction (2020)
Working Paper: Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction (2020)
Working Paper: Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction (2020)
Working Paper: Four levers of redistribution: The impact of tax and transfer systems on inequality reduction (2017) Downloads
Working Paper: Four levers of redistribution: The impact of tax and transfer systems on inequality reduction (2017) Downloads
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