Publication type
Research Paper
Series Number
2018-01
Series
LISER Working Papers
Authors
Publication date
January 15, 2018
Summary:
This paper proposes a framework for studying international differences in the distribution of household income. Integrating micro-econometric and micro-simulation approaches in a decomposition analysis it quantifies the role of tax-benefit systems, employment and occupational structures, labour prices and market returns, and demographic composition in accounting for differences in income inequality across countries. Building upon EUROMOD (the European tax-benefit calculator) and its harmonized datasets, the model is portable and can be implemented for any cross-country comparisons within the EU. An application to the UK and Ireland - two countries that have much in common while displaying different levels of inequality - shows that differences in tax-benefit rules between the two countries account for roughly half of the observed difference in disposable household income inequality. Demographic differences play negligible roles. The Irish tax-benefit system is more redistributive than UK's due to a higher tax progressivity and higher average transfer rates. These are largely attributable to policy parameter differences, but also to differences in pre-tax, pre-transfer income distributions.
Subjects
Related Publications
-
Accounting for differences in income inequality across countries: tax-benefit policy, labour market structure, returns and demographics
Denisa M. Sologon, Philippe Van Kerm, Jinjing Li, Cathal O'Donoghue,Journal Article - 20201010
#524817