Household incomes and redistribution in the European Union: quantifying the equalising properties of taxes and benefits

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1824

Classification and Topics

• Classification: Wirtschaft ; Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access ; Personal Income, Wealth, and Their Distributions ; Taxation and Subsidies: Incidence ; Social Security and Public Pensions
• Subject: income inequality ; redistribution ; microsimulation ; European Union ; Haushaltseinkommen ; Einkommensverteilung ; Einkommensumverteilung ; EU-Staaten ; Verteilungswirkung

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Immervoll, Herwig
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/33646
• Last update: 10.03.2025, 11:41 AM CET