Income redistribution effects of tax expenditures

This paper uses a general equilibrium framework to establish a heterogeneity inter-temporal overlapping dynamic general equilibrium model of basic pension insurance system combining social pooling with personal accounts. Then it introduces the main content of Guo Fa [2005] No.38 and focuses on the income distribution and redistribution effects of the extending coverage of basic pension insurance system by policy simulation, parameter estimation, and sensitivity test. And it makes the theoretical derivation and empirical estimates. The results are shown as follows:firstly, the extending coverage of basic pension insurance system has significant income distribution and redistribution effects, and the redistribution effect is progressive, namely the income transformation from high earners represented by urban enterprise workers to low earners represented by flexible employees and migrant workers; secondly, personal accounts have played a smoothing role, which help to improve lifetime income distribution of different types of workers, but are not conducive to the improvement of income redistribution; thirdly, social pooling accounts have a strong income redistribution effect, which are in favor of income redistribution between different types of workers and narrow the income gap. Parameter sensitivity tests show that the conclusions are robust. Therefore, further optimization of social pooling accounts helps to reduce income inequality.

The redistributive effect of health care finance in twelve OECD countries

Income redistribution and employment effects of rising energy prices

In the above discussion we have taken a particular view of the emulation process, its relation to the movement from one level of living to another level of living and the process of such a movement itself. One may disagree with some elements in this framework but this analysis suggests, nonetheless, that a number of factors are involved in determining the effect of income redistribution on aggregate consumption expenditure. The manner and the force of emulation, the number of consumers in various income groups, their nearness to another level, the extent to which they increase or decrease their savings or consumption as a result of income redistribution appear to be some of the important factors. Unless one has sufficient information on these factors it seems difficult to conclude one way or the other about the effect of income redistribution on aggregate consumption. It becomes still more difficult to come to a definite conclusion if we consider that the consumers desire not only a better standard of living but also larger financial reserves.

AT least since Mandeville's Fable of the Bees (I728), there have been underconsumptionists who have ascribed trade depressions to deficiency in consumption expenditures.' Underconsumptionist thought may further be subdivided into two schools. Monetary underconsumptionism, which does not concern us here, blames underconsumption upon flaws in the processes of creation and circulation of money and credit. Social Credit movement in Great Britain and the Greenback movement in the United States may serve as illustrations. Since Marx and Rodbertus, however, the deficiency of consumption expenditures (and purchasing power) has been ascribed more commonly to maldistribution of real income. This we shall call maldistributionist or real underconsumption. During prosperity, income is concentrated in the higher brackets, where a large fraction is saved. If the savings are hoarded, there arises an immediate deficiency in consumption. If the savings are invested, the deficiency is only postponed until the day when additional consumption goods are produced because of the new investment, and come on to market without additional purchasing power to absorb them. Such, in briefest outline, is the position of the late John A. Hobson, the leading English-language representative of real underconsumptionism in the twentieth century.2 In this view, the principal means to prevent and to remedy depressions is substantial redistribution of income in the direction of greater eaualitv. In addition to Rodbertus, Marx, Hobson, and other leaders of the economic underworld, Keynes has given this position an indirect accolade in the General Theory,3 and it has been adopted by a substantial fraction of the neo-Keynesian school. Virtually all of the discussion, however, has been carried on in a quantitative semi-vacuum, which is to say, without any precise ideas as to the quantitative importance of possible income redistributions. It was of course recognized from the outset that personal savings rise faster than personal income, or in current jargon, that individuals' average propensities to save rise with their incomes. What was not recognized, however, was that for redistribution problems the relative marginal propensities to save of different income classes were likewise important, since redistribution involves shifts between income classes at the margin. To cite an extreme case, if all individuals' marginal propensities to save were identical, equalization of incomes would have no effect whatever on aggregate consumption and saving, however great might be the disparities in average propensities between rich and poor.4 Keynes himself, it would appear, was guilty of some inconsistency on this subject. He considered his consumption function relatively stable (which presumably means stable with respect to changes in income distribution), and at the same time he advocated income equalization in the interest of increased aggregate consumption. One of the first studies to apply modern aggregative analysis in estimating the quantitative effect of income redistribution on aggregate consumption was carried out by Harold Lubell at the Board of Governors of the Federal Reserve System.5 His study, which has been un* This study was financed by a grant from the Social Science Research Committee of the University of Wisconsin. 1 Harry G. Johnson cites the French Physiocrat Boisguillebert a century earlier as maintaining that trade would be more active if taxation fell on the rich than if it fell on the poor, which comes closer than Mandeville to a maldistributionist position. The Macro-Economics of Income Redistribution, in Alan T. Peacock (ed.), Income Redistribution and Social Policy (London, I954), p. I9. 2 For a full presentation of Hobson's views, see Erwin E. Nemmers, Hobson and Underconsumption (unpublished Ph.D. dissertation, Wisconsin, I953). We have called Hobson a twentieth-century writer, :but the initial presentations of his views appeared before the turn of the century. 'Keynes, General Theory, pp. 369-74. ' average propensities are important in this case only if ioo per cent of one individual's income is being taken away, or in a case where income is being given to individuals who had none before. 5 Harold Lubell, Effects of Income Redistribution on Consumers' Expenditures, American Economic Review, xxxvii (March 1947), 157-70, corrected in part, ibid., xxxvii (December 1947), 930. Lubell results appear to have furnished statistical

Income redistribution is the transfer of income from some individuals to others directly or indirectly by means of social mechanisms, such as taxation, public services and so on. Employing a spatial public goods game, we study the influence of income redistribution on the evolution of cooperation. Two kinds of evolutionary models are constructed, which describe local and global redistribution of income respectively. In the local model, players have to pay part of their income after each PGG and the accumulated income is redistributed to the members. While in the global model, all the players pay part of their income after engaging in all the local PGGs, which are centred on himself and his nearest neighbours, and the accumulated income is redistributed to the whole population. We show that the cooperation prospers significantly with increasing income expenditure proportion in the local redistribution of income, while in the global model the situation is opposite. Furthermore, the cooperation drops dramatically from the maximum curvature point of income expenditure proportion. In particular, the intermediate critical points are closely related to the renormalized enhancement factors.

Taxation in a developing country is not only a means of providing public savings and of correcting imperfections in the price system, it is also usually conceived of as a major means of effecting any income redistribution thought desirable. role of taxes in achieving economic equality is sometimes considered even in the poorest countries to be as important as their role in achieving economic growth. This question deserves special attention since many see a necessary conflict in the degree to which these two goals can be achieved-a conflict well expressed by W. Arthur Lewis: The less developed countries have awakened into a century where everybody wishes to ride two horses simultaneously, the horse of economic equality, and the horse of economic development. USSR has found that these two horses will not go in the same direction, and has therefore abandoned one of them. Other less developed countries will have to make their own compromises.' central concern here, of course, is the effect of income redistribution on the level of capital formation. In order to appraise the tax structure of any country, one must therefore have at least some idea, in quantitative terms, of the distribution of income-preferably both by income classes and by factor shares. This knowledge is particularly important when the government must decide on the distribution of tax increases, as is almost certain to be essential in Colombia, as in most developing countries, in the near future. While information on income distribution is no better in Colombia than in other poor countries, fortunately enough data exist to serve as a first step in the appraisal of the appropriate distributional role of the tax system. great inequality of income by income classes is strikingly evident in the 1961 figures carefully assembled by a recent Joint Tax

We examined the effects of market income inequality (income inequality before taxes and transfers) and income redistribution via taxes and transfers on inequality in longevity. We used life tables to compute Gini coefficients of longevity inequality for all individuals and for individuals who survived to at least 10 years of age. We regressed longevity inequality on market income inequality and income redistribution, and we controlled for potential confounders, in a cross-sectional time-series sample of up to 28 predominantly Western developed countries and up to 37 years (1974-2011). Income inequality before taxes and transfers was positively associated with inequality in the number of years lived; income redistribution (the difference between market income inequality and income inequality after taxes and transfers were accounted for) was negatively associated with longevity inequality. To the extent that our estimated effects derived from observational data are causal, governments can reduce longevity inequality not only via public health policies, but also via their influence on market income inequality and the redistribution of incomes from the relatively rich to the relatively poor.

As of 2017, debate is ongoing with respect to the revision of the income deduction as part of the income tax reform. One option under consideration is shifting from the income deduction to a tax credit program.The objective of this shift would be enhancing the income redistribution function of the income tax system by strengthening its progressiveness. In relation to the debate on this matter, although some past research papers discussed how the income redistribution function may be affected by a shift from the income deduction to tax credit, no previous analysis has explicitly taken into consideration changes in labor supply that may be caused by the shift. Therefore, in this paper, we conduct simulation concerning the impact of a shift to tax credit on the income redistribution effect in consideration of labor supply and examine how much the shift is expected to contribute to the enhancement of the income redistribution function. The analysis results suggest the possibility that when fixed cost is a determinant factor as to whether or not individual households supply labor, a shift to tax credit may promote labor supply, especially in view of extensive margin, through the income effect although this effect depends on the size of the tax credit amount. However, it should be kept in mind that in this analysis, we were unable to exclude the income effect due to a tax revenue decline. A shift to transferrable basic deduction under debate at the Tax Commission may also be similar in effect to a shift to tax credit. However, when a spouse fs income is close to zero, the deduction is transferred to the other spouse. As a result, the spouse whose income is close to zero receives no income effect, so this measure fs effect of promoting labor market participation is limited. With all those factors considered, a shift to tax credit may be effective in promoting income redistribution not only through a tax system change itself but also through a change in income distribution due to its effect of promoting labor market participation. However, this paper fs analysis is conducted under various preconditions, such as taking dynamic behavior out of consideration for the convenience of simulation conducted within the limitations of data constraints. Therefore, the conclusion arrived at through the analysis should be looked at with some reservations.

Is there evidence that the exchange rate depreciation shocks lead to the redistribution of income from workers to producers’ profits? In addition, to what extent do consumer price inflation and exchange rate volatility channels transmit exchange rate depreciation shocks to marginal propensity to consume? Evidence shows that the NEER depreciation shock has contractionary effects on economic growth. This is more so due to the income redistribution effects from workers to producers. The effects are propagated via the inflation channel. The presence of inflation following the NEER depreciation shocks exacerbates the decline in wages. This is in contrast to the magnifying effect of the NEER depreciation shock that raises gross operating surpluses. This suggests that the NEER depreciation redistributes the incomes from workers to producers, and the effects are magnified by inflation levels. Furthermore, price stability matters and a low inflation is ideal. The time varying marginal propensity to consume declines but the contraction is larger due to persistently rising exchange rate depreciation shock than a less persistent shock. In addition, the persistently rising exchange rate depreciation shock leads to a large increase in the Gini coefficient than a less persistent shock. This evidence shows the redistribution of income effects has implications for the time varying marginal propensity to consume and Gini coefficient. Moreover, the time varying marginal propensity to consume declines more in the presence of overall and permanent exchange rate volatility channels than when these are shutoff in the model. This evidence corroborates the findings that the time varying marginal propensity to consume is impacted by the elevated inflationary pressures and the accompanying exchange rate volatility following a NEER depreciation shock. These results show that price and exchange stability matters.

In the context of personal income tax (PIT) reform in China in 2018, this paper examines some of the major issues of concern regarding the reform and income distribution. Using the China Personal Income Tax Micro‐simulation model, the paper compares the differences between the 2011 and 2018 PIT systems, and finds that residents relying on different income sources may face a large degree of real tax rate change. Once the tax system is altered to PIT 2018, the coverage of PIT for wage earners will decrease from 46.9 to 23.4 percent, the income redistributive effect will drop from 1.95 to 1.22 percent and the PIT's role in fiscal revenue will also be negatively affected. Nevertheless, if individual income continues to grow, the share of PIT in fiscal revenue is expected to return to the 2018 level in 2022, but its income redistribution function is difficult to recover in the short term. The paper finds that the effect of PIT on income distribution depends on the tax structure. Gradual transition to an “entirely comprehensive” tax system when conditions are appropriate will achieve better income redistribution results at a lower average tax rate.

This paper investigates the effects of a combination of individual health accounts (IHAs) and catastrophic insurance on lifetime income redistribution by examining the variations in end‐of‐life IHA balances and lifetime out‐of‐pocket health expenditures. We exploit longitudinal health expenditure data from 2005 to 2007 in Kunshan City, Jiangsu Province of China. We find a high concentration of low IHA balances at the end of life, with most equal to zero. This finding suggests that most IHA balances are used for health expenditures and that the income redistribution effect through the accumulation of IHA balance is limited. However, the results also show a wide variation in lifetime out‐of‐pocket spending in the form of deductibles and coinsurance, which implies serious inequality in individual financial burden that can lead to a large income redistribution effect.

This paper employs a panel of 23 local governments in Taiwan over 1998–2010 to re-estimate the redistribution effects of intergovernmental fiscal transfers by considering a self-financing resources of local government as the transition variable in panel smooth transition regression models. Empirical results show that the income (or tax revenues) redistribution effects of fiscal transfer policies are nonlinear and vary with time and across local governments. The grants from central government can improve income and tax revenues distribution of local governments; however, the centrally allotted tax revenues have inverse effects and the total fiscal transfers have ambiguous effects. The total fiscal transfer is a proper policy instrument for improving income redistribution, and the grants for improving tax revenues redistribution. However, high self-financing resources ratios are harmful for these redistribution effects.

Does income inequality worsen a country's health outcomes? In this study, we examine the effect of income inequality and redistribution on health outcomes using a panel dataset for a global sample of 154 countries from 1990 to 2020, and the instrumental variable method. The evidence from the empirical analyses revealed that, on average, higher income inequality is associated with poor health outcomes. On the other hand, this study documented that, on average, countries with higher income redistribution have better health outcomes. From regional analyses, we documented that income inequality strongly worsens health outcomes in South Asia, the Middle East and North Africa, sub‐Saharan Africa and the Caribbean and Latin America. We found that education, environmental pollution, health expenditure and GDP per capita are the potential channels through which income inequality affects health outcomes. The findings established in this study suggest that a political environment that supports better income distribution would lead to better health outcomes.

This study aims to measure and analyze the inclusive growth rate in Indonesia by using per capita expenditure data from Indonesian population. Inclusiveness of growth is observed from the Growth Incidence Curve and pro-poor growth approach using Poverty Equivalent Growth Rate (PEGR) method. It also sees the effect of growth and income redistribution on poverty change using Decomposition of Poverty through Shapley value. This research is divided into two periods, i.e. 2012-2014 and 2014-2016 by grouping the territory of Indonesia into three areas, i.e. Java and Bali, Sumatra and Kalimantan Island, and Eastern Indonesia. The result shows that in 2012-2014, the income growth in Indonesia is inclusive, while in 2014-2016 its growth is not inclusive yet. This is due to the effect of economic growth still hampered by the effect of income inequality over the years 2014 to 2016.