I am grateful to Tim Callan for useful comments. I am indebted to all past and current members of the EUROMOD consortium as well as to those involved in the development of the model. Simulations performed in this study rely on the Family Expenditure Survey (FES) made available by the UK Office for National Statistics through the Data Archive. Material from the FES is Crown Copyright and is used by permission.
The Distributional Effects of Tax-benefit Policies under New Labour: A Decomposition Approach*
Version of Record online: 2 JAN 2012
© Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2012
Oxford Bulletin of Economics and Statistics
Volume 74, Issue 6, pages 856–874, December 2012
How to Cite
Bargain, O. (2012), The Distributional Effects of Tax-benefit Policies under New Labour: A Decomposition Approach. Oxford Bulletin of Economics and Statistics, 74: 856–874. doi: 10.1111/j.1468-0084.2011.00684.x
- Issue online: 26 OCT 2012
- Version of Record online: 2 JAN 2012
- Final Manuscript Received: January 2010
I revisit the distributional effects of tax-benefit policy reforms under New Labour using counterfactual microsimulations embedded in a Shapley decomposition of time change in inequality and poverty indices. This makes it possible to quantify the relative effect of policy changes compared to all other changes, and to check the sensitivity of this policy effect to the use of (i) income vs. price indexation, and (ii) base vs. end period data. Inequality and poverty depth would have increased, and the sharp fall in child poverty would not have occurred, had the reforms of income support and tax credits not been implemented.