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An extended view on inequality and redistribution in the European Union - The role of indirect taxation and in-kind benefits

Author

Listed:
  • Christl, Michael
  • De Poli, Silvia
  • Köppl-Turyna, Monika

Abstract

This paper refines the concept of disposable income by incorporating governmentprovided in-kind benefits for education and health services, as well as imputed VAT payments, following Figari and Paulus (2015). Our analysis reveals that including these elements significantly reduces income inequality, as seen in a decrease in the Gini coefficient across all examined countries. While direct taxes and cash benefits are the main drivers of redistribution, in-kind benefits also play a substantial role, while VAT having a smaller, negative impact. Our study highlights that additionally extending the income concept increases also the targeting of the tax benefit system to low-income households, however to a very different extend across the EU Member States. Our new, broader approach allows for more accurate assessments of redistribution and cross-country comparisons, offering valuable insights for EU-level policy evaluations.

Suggested Citation

  • Christl, Michael & De Poli, Silvia & Köppl-Turyna, Monika, 2024. "An extended view on inequality and redistribution in the European Union - The role of indirect taxation and in-kind benefits," GLO Discussion Paper Series 1508, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1508
    as

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    File URL: https://www.econstor.eu/bitstream/10419/304385/1/GLO-DP-1508.pdf
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    References listed on IDEAS

    as
    1. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Post-Print hal-04316442, HAL.
    2. Michael Christl & Silvia De Poli & Monika Köppl-Turyna, 2024. "Does redistribution hurt growth? An Empirical Assessment of the Redistribution-Growth Relationship in the European Union," Working Papers 668, ECINEQ, Society for the Study of Economic Inequality.
    3. Julien Blasco & Elvire Guillaud & Michaël Zemmour, 2023. "The inequality impact of consumption taxes: An international comparison," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04316442, HAL.
    4. Christl, Michael & Köppl–Turyna, Monika & Lorenz, Hanno & Kucsera, Dénes, 2020. "Redistribution within the tax-benefits system in Austria," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 250-264.
    5. Blasco, Julien & Guillaud, Elvire & Zemmour, Michaël, 2023. "The inequality impact of consumption taxes: An international comparison," Journal of Public Economics, Elsevier, vol. 222(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    tax-benefits model; EUROMOD; welfare state; in-kind benefits; indirect taxes; redistribution;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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