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Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977–2018

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  • Nicolas Herault

    (University of Melbourne)

  • Stephen P. Jenkins

    (London School of Economics)

Abstract

We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977–2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue – the definition of the reference (‘pre-fisc’) distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average benefit rates. In contrast, trends in the redistributive effects of direct and indirect taxes are mostly associated with changes in progressivity. For in-kind benefits, changes in the average benefit rate and progressivity each played the major roles at different times.

Suggested Citation

  • Nicolas Herault & Stephen P. Jenkins, 2021. "Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977–2018," Working Papers 592, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2021-592
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    References listed on IDEAS

    as
    1. Nicolas Herault & Francisco Azpitarte, 2015. "Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Benefit System Account for the Decline in Redistribution?," The Economic Record, The Economic Society of Australia, vol. 91(292), pages 38-53, March.
    2. Dominic Webber & Richard Tonkin & Martin Shine, 2020. "Using Tax Data to Better Capture Top Incomes in Official UK Income Inequality Statistics," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 679-700, National Bureau of Economic Research, Inc.
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    6. Jenkins, Stephen, 1988. "Reranking and the Analysis of Income Redistribution," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 65-76, February.
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    More about this item

    Keywords

    Kakwani decomposition; inequality; redistributive effect; progressivity; reranking; benefits; taxes;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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