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Income redistribution through taxes and social benefits: the case of Slovenia and Croatia

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  • Cok, Mitja
  • Urban, Ivica
  • Verbič, Miroslav

Abstract

The article analyses the redistributive effect attained by personal income tax, social security contributions and social benefits in Slovenia and Croatia. The redistributive effect is decomposed first to reveal progressivity and horizontal inequity effects, and further to show contributions of different tax and benefit instruments. Even though both countries started from the same socioeconomic background two decades ago, the current results reveal divergence that is a consequence of diverse development during this period. The results indicate that Croatia experienced significantly higher pre-fiscal income inequality and lower redistributive effect than Slovenia. Horizontal inequity effects, though, were higher in Slovenia than in Croatia. In both countries, the means-tested social benefits exerted an over-proportionate influence on vertical effects, suggesting a strong impact of the welfare state on income position of their residents, but also induced a large amount of horizontal inequity. In Slovenia, the non-means-tested benefits slightly increased income inequality.

Suggested Citation

  • Cok, Mitja & Urban, Ivica & Verbič, Miroslav, 2012. "Income redistribution through taxes and social benefits: the case of Slovenia and Croatia," MPRA Paper 38918, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38918
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    References listed on IDEAS

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    1. World Bank, 2007. "Croatia - Living Standards Assessment : Volume 1. Promoting Social Inclusion and Regional Equity," World Bank Publications - Reports 8018, The World Bank Group.
    2. repec:inq:inqwps:ecineq2012-252 is not listed on IDEAS
    3. Ivica Urban, 2014. "Contributions of taxes and benefits to vertical and horizontal effects," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(3), pages 619-645, March.
    4. Jean‐Yves Duclos & Peter J. Lambert, 2000. "A normative and statistical approach to measuring classical horizontal inequity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 87-113, February.
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    6. Ivica, Urban, 2011. "Duclos-Jalbert-Araar decomposition of redistributive effect: implementation issues," MPRA Paper 28068, University Library of Munich, Germany.
    7. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
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    Cited by:

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    2. Abdelkrim Araar & Luis Huesca, 2014. "Comparison of the Tax System Progressivity Over Time: Theory and Application with Mexican Data," Cahiers de recherche 1419, CIRPEE.
    3. Nga Thi Viet Nguyen & Ivica Rubil, 2021. "Fiscal Policies, Inequality, and Poverty in Croatia," Working Papers 2104, The Institute of Economics, Zagreb.
    4. Carlos Farinha Rodrigues & Isabel Andrade, 2013. "Robin Hood versus Piggy Bank: Income redistribution in Portugal 2006-10," Working Papers Department of Economics 2013/28, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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    More about this item

    Keywords

    redistributive effect; horizontal inequity; taxes and benefits; decomposition; Slovenia; Croatia;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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