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The redistributive effect of social transfer programmes and taxes: A decomposition across countries

Authors


  • This study is part of the research programme “Reforming Social Security”. Financial support of Foundation Instituut GAK is gratefully acknowledged. Chen Wang is funded by the China Scholarship Council. We thank Palvolgyi Balazs, Jim Been, When-Hao Chen, Marike Knoef, Arnaldur Sölvi Kristjánsson, Susan Kuivalainen, Judith Niehues, and Olaf van Vliet for useful suggestions and for comments on an earlier draft and presentations of this paper. The usual disclaimer applies.

Chen Wang, Economics Department, Leiden University, P.O. Box 9520, 2300RA Leiden, Netherlands; Email: wangc1@law.leidenuniv.nl.

Koen Caminada, Economics Department, Leiden University, P.O. Box 9520, 2300RA Leiden, Netherlands; Email: c.l.j.caminada@law.leidenuniv.nl.

Kees Goudswaard, Economics Department, Leiden University, P.O. Box 9520, 2300RA Leiden, Netherlands; Email: k.p.goudswaard@law.leidenuniv.nl.

Abstract

The aim of this article is to offer detailed information of the redistributive impact of social transfer programmes and taxes in 28 Member countries of the Organisation for Economic Co-operation and Development, employing data that have been computed from the Luxembourg Income Study's micro-level database. We find that welfare states on average reduce inequality by 35 per cent. Social benefits have a much stronger redistributive impact than taxes. As far as social programmes are concerned, public pensions account for the largest reduction in income inequality, although the pattern is diverse across countries. To a lesser extent, social assistance, disability and family benefits also contribute to smaller income disparities.

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