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10 February 2021
Article (Scientific journals)
Accounting for Differences in Income Inequality across Countries: Tax-benefit Policy, Labour Market Structure, Returns and Demographics
Sologon, Denisa; van Kerm, Philippe; Li, Jinjing et al.
2021In Journal of Economic Inequality, 19, p. 13-43
Peer reviewed


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Keywords :
income inequality; tax and transfer policy; cross-national comparisons; microsimulation
Abstract :
[en] This paper presents a framework for studying international differences in the distribution of household income. Integrating micro-econometric and micro-simulation approaches in a decomposition analysis, it quantifies the role of tax-benefit systems, employment and occupational structures, labour and financial market returns, and demographic composition in accounting for differences in income inequality across countries. Building upon EUROMOD (the European tax-benefit calculator) and its harmonised datasets, the model is portable and can be implemented for cross-country comparisons between any participating country. An application to the UK and Ireland—two countries that have much in common while displaying different levels of inequality—shows that differences in tax benefit rules between the two countries account for roughly half of the observed difference in disposable household income inequality. Demographic differences play negligible roles. The Irish tax-benefit system is more redistributive than UK\textquoterights due to a higher tax progressivity and higher average transfer rates. These are largely attributable to policy parameter differences, but also to differences in pre-tax, pre-transfer income distributions.
Disciplines :
Social economics
Author, co-author :
Sologon, Denisa ;  Luxembourg Institute of Socio-Economic Research - LISER
van Kerm, Philippe ;  University of Luxembourg > Faculty of Humanities, Education and Social Sciences (FHSE) > Department of Social Sciences (DSOC) ; Luxembourg Institute of Socio-Economic Research - LISER
Li, Jinjing
O'Donoghue, Cathal
External co-authors :
Language :
Title :
Accounting for Differences in Income Inequality across Countries: Tax-benefit Policy, Labour Market Structure, Returns and Demographics
Publication date :
March 2021
Journal title :
Journal of Economic Inequality
Publisher :
Springer Verlag
Volume :
Pages :
Peer reviewed :
Peer reviewed
Focus Area :
Computational Sciences
Funders :
FNR - Fonds National de la Recherche


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