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Less Income Inequality and More Growth – Are They Compatible? Part 3. Income Redistribution via Taxes and Transfers Across OECD Countries

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  • Isabelle Joumard

    (OECD)

  • Mauro Pisu

    (OECD)

  • Debra Bloch

    (OECD)

Abstract

Taxes and transfers reduce inequality in disposable income relative to market income. The effect varies, however, across OECD countries. The redistributive impact of taxes and transfers depends on the size, mix and the progressivity of each component. Some countries with a relatively small tax and welfare system (e.g. Australia) achieve the same redistributive impact as countries characterised by much higher taxes and transfers (e.g. Germany) because they rely more on income taxes, which are more progressive than other taxes, and on means-tested cash transfers. This paper provides an assessment of the redistributive effect of the main taxes and cash transfers based on a set of policy indicators and a literature review. It also identifies empirically four groups of countries with tax and transfer systems that share broadly similar features. The paper then assesses potential trade-offs and complementarities between economic growth and income redistribution objectives associated with various tax and transfer reform options. Moins d'inégalités de revenu et plus de croissance – Ces deux objectifs sont-ils compatibles ?: Partie 3. Redistribution du revenu par le biais de l'impôt et des transferts dans les pays de l'OCDE Les impôts et les transferts amènent les inégalités de revenu disponible à un niveau inférieur à celles du revenu marchand. Cet effet redistributif des impôts et transferts n’a pas la même ampleur dans tous les pays de l’OCDE. Il dépend de la taille, de la composition des impôts et transferts ainsi que de la progressivité de chaque composante. Certains pays ayant un système fiscal et de protection sociale relativement peu importants (comme l’Australie, par exemple) obtiennent le même effet redistributif que des pays où les impôts et les transferts sont beaucoup plus élevés (comme l’Allemagne) du fait qu’ils recourent davantage aux impôts sur le revenu, plus progressifs que les autres impôts, et à des transferts en espèces ciblés sur les ménages les plus démunis. Ce document donne une évaluation de l’effet redistributif des principaux impôts et transferts à partir d’une série d’indicateurs de l’action publique et d’une revue des études existantes. Il identifie aussi, de manière empirique, quatre groupes de pays dont les systèmes fiscaux et de protection sociale présentent des caractéristiques à peu près similaires. Le document évalue ensuite les arbitrages et complémentarités potentiels entre les objectifs de croissance économique et de redistribution du revenu relatifs aux diverses possibilités de réforme des systèmes fiscaux et de protection sociale.

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  • Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 3. Income Redistribution via Taxes and Transfers Across OECD Countries," OECD Economics Department Working Papers 926, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:926-en
    DOI: 10.1787/5k9h296b1zjf-en
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    Cited by:

    1. Peter Hoeller, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 4. Top Incomes," OECD Economics Department Working Papers 927, OECD Publishing.
    2. Pietrovito, Filomena & Pozzolo, Alberto Franco & Resce, Giuliano & Scialà, Antonio, 2023. "Fiscal decentralization and income (re)distribution in OECD countries’ regions," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 69-81.
    3. Conrad Scheibe, 2016. "Fiscal Consolidations and Their Effects on Income Inequality," UCL SSEES Economics and Business working paper series 2016-4, UCL School of Slavonic and East European Studies (SSEES).
    4. Kaja Bonesmo Fredriksen, 2012. "Income Inequality in the European Union," OECD Economics Department Working Papers 952, OECD Publishing.
    5. Łukasz Rawdanowicz & Eckhard Wurzel & Ane Kathrine Christensen, 2013. "The Equity Implications of Fiscal Consolidation," OECD Economics Department Working Papers 1013, OECD Publishing.
    6. Dotti, Valerio, 2020. "Income inequality, size of government, and tax progressivity: A positive theory," European Economic Review, Elsevier, vol. 121(C).
    7. Isabell Koske & Jean-Marc Fournier & Isabelle Wanner, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 2. The Distribution of Labour Income," OECD Economics Department Working Papers 925, OECD Publishing.
    8. Peter Hoeller & Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 1. Mapping Income Inequality Across the OECD," OECD Economics Department Working Papers 924, OECD Publishing.
    9. Abdulaleem Isiaka & Alexander Mihailov & Giovanni Razzi, 2022. "Distributional Effects of Public Spending and Tax Shocks in Middle-Income Countries: A Panel VAR Approach," Economics Discussion Papers em-dp2022-09, Department of Economics, University of Reading.
    10. Mr. Raphael A Espinoza & Mrs. Esther Perez Ruiz, 2016. "How Do Fiscal and Labor Policies in France Affect Inequality?," IMF Working Papers 2016/041, International Monetary Fund.
    11. Brown, Sarah & Kontonikas, Alexandros & Montagnoli, Alberto & Moro, Mirko & Onnis, Luisanna, 2021. "Life satisfaction and austerity: Expectations and the macroeconomy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    12. Oliver Denk & Robert P. Hagemann & Patrick Lenain & Valentin Somma, 2013. "Inequality and Poverty in the United States: Public Policies for Inclusive Growth," OECD Economics Department Working Papers 1052, OECD Publishing.
    13. Sarah Marchal & Wim Van Lancker, 2018. "The measurement of targeting intentions in complex welfare states: a proposal and empirical applications," Working Papers 1801, Herman Deleeck Centre for Social Policy, University of Antwerp.
    14. Isabelle Joumard & Mauro Pisu & Debbie Bloch, 2012. "Tackling income inequality: The role of taxes and transfers," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 37-70.

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    More about this item

    Keywords

    analyse par clusters; cluster analysis; impôt; income inequality; inégalité des revenus; redistribution; redistribution; système de protection sociale; taxes; transfers; transferts; welfare system;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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