Do taxes and transfers reduce gender income inequality? Evidence from eight European welfare states

Silvia Avram,Daria Popova

doi:10.1016/j.ssresearch.2021.102644

Silvia Avram, Daria Popova

Open Access

https://doi.org/10.1016/j.ssresearch.2021.102644

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Abstract

We examine how taxes and transfers affect the incomes of men and women. Using microsimulation and intra-household income splitting rules, we measure the differences in the level and composition of individual disposable income by gender in eight European countries covering various welfare regime types. We quantify the extent to which taxes and transfers can counterbalance the gender gap in earnings, as well as which policy instruments contribute most to reducing the gender income gap. We find that with the exception of old-age public pensions, all taxes and transfers significantly reduce gender income inequality but cannot compensate for high gender earnings gaps. Our findings suggest that gender income equality is more likely to be achieved by promoting the universal/dual breadwinner model, whereby women's labour force participation and wages are on a par with men. To achieve this, men will likely need to work less and care more.

Highlights

A large body of scholarly work has examined the links between the modern welfare state and gender inequality. Nelson (1990) highlighted how the welfare state differentiated between care/unpaid work and paid work when establishing social entitlements, benefit levels, and the political legitimacy of social rights, in practice dualizing provision for men and women
Our findings suggest that achieving gender income equality requires primarily closing the gender gap in hours and wages through the provision of public services and reducing the unpaid work done by women at home, as suggested by the universal/dual breadwinner model
A share of the observed variation in gender income gaps can be attributed to the impact of welfare state taxes and transfers, confirming the results of previous studies using a multi-country design (e.g. see Gornick (2004); Budig et al (2016) for reviews)

Summary

Introduction

A large body of scholarly work has examined the links between the modern welfare state and gender inequality. Nelson (1990) highlighted how the welfare state differentiated between care/unpaid work and paid work when establishing social entitlements, benefit levels, and the political legitimacy of social rights, in practice dualizing provision for men and women. A large body of scholarly work has examined the links between the modern welfare state and gender inequality. Nelson (1990) highlighted how the welfare state differentiated between care/unpaid work and paid work when establishing social entitlements, benefit levels, and the political legitimacy of social rights, in practice dualizing provision for men and women.

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Discussion

Conclusion