Indexing out of poverty? Fiscal drag and benefit erosion in cross-national perspective

Publication type

Journal Article

Authors

Publication date

March 5, 2019

Summary:

We assess how tax‐benefit policy developments in 2001–11 affected the household income distribution in seven EU countries. We use the standard microsimulation‐based decomposition method, separating further the effect of structural policy changes and the uprating of monetary parameters, which allows us to measure the extent of fiscal drag and benefit erosion in practice. The results show that despite different fiscal effects, policies overall mostly reduced poverty and inequality and both types of policy developments had sizeable effects on the income distribution. We also find that the uprating of monetary parameters not only had a positive effect on household incomes, meaning fiscal drag and benefit erosion were avoided, but generally also contributed more to poverty and inequality reduction than structural policy reforms.

Published in

Review of Income and Wealth

DOI

https://doi.org/10.1111/roiw.12413

Subjects

Notes

Open Access

© 2019 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of International Association for Research in Income and Wealth

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

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