Distribution Of Disposable Income Research Articles

Social expenditure composition and inequality: A dynamic panel threshold analysis for OECD countries

This paper studies the relationship between inequality and public social spending for an overall sample of 28 OECD countries spanning 1997 to 2017. We add to the literature by dissecting social expenditure according to nine programs and allowing for the existence of a non-linear relation in the context of a dynamic panel threshold model. The analysis reveals a positive contribution of old-age pensions to the Gini index of disposable income distribution, the most often used indicator of inequality, supporting the need to rethink old-age pension systems in this group of countries. The results for the other social expenditure components vary with the inequality measure used and country groups under analysis, highlighting the problems that may be associated with panel data even when a set of countries with many characteristics in common is used. Our results also stress the relevance of accommodating nonlinearities when explaining inequality, paving the way to a better understanding of its behaviour.

Differences in COVID-19 Policies and Income Distribution: A Cross-Country Comparison

This paper looks at the distribution of disposable income by deciles to indicate how specific mitigating measures have influenced income groups and considers the effectiveness of different combinations of containment measures in the European Union. Simulations using the EUROMOD tax-benefit microsimulation model imply that the mitigating effects of the simulated measures are regressive, with a bigger influence on the bottom part of the income distribution. It is also observed that old democracies benefit from these measures more than new democracies. Surprisingly, our results further reveal that for the two highest decile income groups, the COVID-19 containment measures are stronger in new democracies. Finally, a qualitative comparative analysis of 19 EU countries suggests that each country should apply mixes of containment measures that fit its own context. Although there is no one-size-fits-all policy, old democracies seem more successful at handling the consequences of the COVID-19 crisis than new democracies. This study complements the literature as it shows how COVID-19 measures have influenced household income groups, and second, it adds to earlier studies by clarifying that only specific context-dependent combinations of containment measures are successful at preventing the loss of people’s living standards, thereby giving policymakers the necessary leeway to formulate effective policies.

Decomposition of the Changes in Household Disposable Income Distribution in China

Decomposition of the Changes in Household Disposable Income Distribution in China

Why a labour market boom does not necessarily bring down inequality: putting together Germany's inequality puzzle

AbstractAfter an economically tough start to the new millennium, Germany experienced an unprecedented employment boom after 2005, only stopped by the COVID‐19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid‐ or high‐income range or that other developments offset the effects of the drastically improved labour market conditions. The present paper solves this puzzle by breaking down the observed changes in the distribution of disposable incomes between 2005–06 and 2015–16 into the contributions of eight different factors, one of them being the employment boom. Our results suggest that, while the latter did have an equalising impact, it was partially offset by the disequalising impact of other factors, and substantially dampened by the transfer system. Our results point to a strong role of the German transfer system as a distributional stabiliser implying that, if the COVID‐19 shock were to persistently reverse all the employment gains that occurred during the boom, this would only have a moderately disequalising effect on the distribution of net incomes.

Armut in Deutschland \u2014 Einfluss der Coronapandemie noch nicht ablesbar

AbstractWhile the risk of poverty increased quite markedly around the turn of the millennium, a further but flatter increase can be subsequently observed. The development was also accompanied by a stronger increase in the at-risk-of-poverty threshold, particularly in the wake of the positive income trend in the years prior to the coronavirus pandemic. The extent to which the corona pandemic influenced poverty cannot yet be assessed, as the results published so far are not comparable with previous years due to a break in the available time series. However, first indications of simulation studies suggest that the relative risk of poverty and the distribution of disposable income may have changed only slightly.

Income Inequality and Redistribution in Lithuania: The Role of Policy, Labor Market, Income, and Demographics

We model the household disposable income distribution in Lithuania and explore the drivers of the increase in income inequality between 2007 and 2015. We quantify the contributions of four factors to changes in the disposable income distribution: (i) demographics; (ii) labor market structure; (iii) returns and prices; and (iv) tax–benefit system. Results show that the effects of the factors were substantial and reflected heterogeneous developments over two subperiods: changes in the tax and benefit system cushioned a rapid rise in market income inequality because of the global financial crisis during 2007–2011, but failed to do so during the subsequent years of economic expansion, when rising returns in the labor and capital markets significantly increased disposable income inequality. We also find that declining marriage rates contributed to the increase in income inequality in Lithuania.

Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data

Abstract A growing literature has documented the role of firm heterogeneity within sectors for nominal income inequality. This article explores the implications for household price indices across the income distribution. Using detailed matched U.S. home and store scanner microdata, we present evidence that rich and poor households source their consumption differently across the firm size distribution within disaggregated product groups. We use the data to examine alternative explanations, propose a tractable quantitative model with two-sided heterogeneity that rationalizes the observed moments, and calibrate it to explore general equilibrium counterfactuals. We find that larger, more productive firms sort into catering to the taste of richer households, and that this gives rise to asymmetric effects on household price indices. We quantify these effects in the context of policy counterfactuals that affect the distribution of disposable incomes on the demand side or profits across firms on the supply side.

Why a Labour Market Boom Does Not Necessarily Bring Down Inequality: Putting Together Germany&Apos;S Inequality Puzzle

After an economically tough start into the new millennium, Germany experienced an unprecedented employment boom after 2005 only stopped by the COVID-19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid- or high-income range or that other developments offset the effects of the drastically improved labour market conditions. The present paper solves this puzzle by breaking down the observed changes in the distribution of disposable incomes between 2005/06 and 2015/16 into the contributions of eight different factors, one of them being the employment boom. Our results suggest that, while the latter did have an equalising impact, it was partially offset by the disequalising impact of other factors and substantially dampened by the tax and transfer system. Our results point to a strong role of the German tax and transfer system as a distributional stabilizer implying that, if the COVID-19 shock were to persistently reverse all the employment gains that occurred during the boom, this would only have a moderately disequalising effect on the distribution of net incomes.

Wybrane koncepcje pomiaru nierówności dochodowych

Determining the level of income inequality requires the adoption of a specific measurement methodology. The aim of the study was to review and discuss the methodologies used to measure income inequality. Four measures are presented, each based on different assumptions. These measures were the Gini coefficient, Theil coefficient, Kukuła coefficient and unevenness coefficient. The first three measures, and in particular the Gini coefficient, are commonly described in the literature, while the unevenness coefficient is the author’s proposal for measuring income inequality. The empirical material for the research consists of data on the distribution of disposable income by decile groups in households in Poland for the years 2005–2017. The most important issue in practice regarding the measurement of income inequality was the transfer principle. Depending on the methodology adopted, the transfer of income is treated differently. The Gini, Theil and Kukula coefficients respond to any change in the income distribution, while the unevenness coefficient only to changes above the average. In a situation where the Gini coefficient (Theil and Kukula) decreases (increases), the level of inequality decreases (increases), but it is not known which transfers led to such a result. The decreasing (growing) unevenness coefficient means that these were transfers from groups with shares in income above (below) the average for groups with shares below (above) the average.

Estimating the parameter of inequality aversion on the basis of a parametric distribution of incomes

Research background: In applied welfare economics, the constant relative inequality aversion function is routinely used as the model of a social decisionmaker?s or a society?s preferences over income distributions. This function is entirely determined by the parameter, ?, of inequality aversion. However, there is no authoritative answer to the question of what the range of ? an analyst should select for empirical work.
 Purpose of the article: The aim of this paper is elaborating the method of deriving ? from a parametric distribution of disposable incomes.
 Methods: We assume that households? disposable incomes obey the generalised beta distribution of the second kind GB2(a,b,p,q). We have proved that, under this assumption, the social welfare function exists if and only if ? belongs to (0,ap+1) interval. The midpoint ?mid of this interval specifies the inequality aversion of the median social-decisionmaker.
 Findings & Value added: The maximum likelihood estimator of ?mid has been developed. Inequality aversion for Poland 1998?2015 has been estimated. If inequality is calculated on the basis of disposable incomes, the standard inequality?development relationship might be complemented by inequality aversion. The ?augmented? inequality?development relationship reveals new phenomena; for instance, the stage of economic development might matter when assessing the impact of inequality aversion on income inequality.

Institutional determinants of inequality in chosen post-socialist countries: the role of political freedom

Motivation: economic literature indicates that differences in the inequality levels among modern countries can be attributed to many factors or processes such as: economic performance, natural resources endowments, demographical structure or institutional framework. It seems to be important to emphasize that in the case of post-socialist countries where many predetermined trajectories of inequalities were adopted policies and institutions played an important role in shaping inequality. Aim: in this context the question about the role of political freedom — as one of the key aspects of institutional framework — for the levels of inequality in these countries seems to be especially important. The aim of this paper is to evaluate the role of different political institutions adopted in post-socialist countries for the levels of income inequalities observed among them. Results: the obtained results indicate that the post-socialist countries which managed to create more inclusive political institutions experience lower inequalities in the distribution of disposable income.

Accounting for the Distributional Effects of the 2007-2008 Crisis and the Economic Adjustment Program in Portugal

This paper develops a new method to model the household disposable income distribution and decompose changes in this distribution (or functionals such as inequality measures) over time. It integrates both a micro-econometric and microsimulation approaches, combining a flexible parametric modelling of the distribution of market income with the EUROMOD microsimulation model to simulate the value of taxes and benefits. The method allows for the quantification of the contributions of four main factors to changes in the disposable income distribution between any two years: (i) labour market structure; (ii) returns; (iii) demographic composition; and (iv) tax-benefit system. We apply this new framework to the study of changes in the income distribution in Portugal between 2007 and 2013, accounting for the distributional effects of the 2007-2008 crisis and aftermath policies, in particular the Economic Adjustment Program (EAP). Results show that these effects were substantial and reflected markedly different developments over two periods: 2007-2009, when stimulus packages determined important income gains for the bottom of the distribution and a decrease in income inequality; 2010-2013, when the crisis and austerity measures took a toll on the incomes of Portuguese households, particularly those at the bottom and top of the distribution, leading to an increase in income inequality.

The impact of housing consumption value on the spatial distribution of welfare

The measure of a household's income should include not only monetary components but also non-monetary components and in-kind benefits, such as imputed rent. Imputed rent is the rent an owner can expect to receive were the house on the rental market. This study examined the impact of net imputed rent on the distribution of income in a spatial context. The spatial impact of net imputed rent, mortgage payments, private rent, public rent (social housing schemes) and reverse mortgage/annuity on the spatial distribution of disposable income was examined for the year 2011. A spatial microsimulation model, simulated model of the Irish local economy (SMILE), was used to simulated disposable income at a detailed spatial scale. Rental and property values are estimated at a spatial scale adopting the kriging methodology. The created rental and property data were merged into the SMILE simulated dataset to examine the impact of housing on the spatial distribution of disposable income at a small area level. Results show that the imputed cash flows from property ownership decreases the income share of those at the bottom of the income distribution and is inequality increasing, except in the case of those aged 65 +. Spatially the benefits of housing are greatest in urban areas where property values are highest. The small area measurements of imputed rent highlight the dis-equalising impact imputed rent and housing wealth has on inequality; the rich being able to consume more housing.

Vnímání příjmových nerovností a preference ohledně rozdělení příjmů v České republice

A representative survey of adult population is used to analyse perceptions of existing income inequality and preferences for ideal income distribution in the Czech Republic. On average, Czechs view the distribution of disposable income as more unequal than it actually is. This biased perception results from underestimating total income shares belonging to bottom quintiles and overestimating the total income share belonging to the top income quintile. Whereas the majority of Czechs prefer some level of income stratification, there are about four tenths of people who would prefer to live in a completely equal society. These are primarily older, less educated and lower income people whose preferences formulated under uncertainty are mostly consistent with the maximin principle and inequality aversion. Almost a fifth of Czechs would prefer an income distribution consistent with efficiency concerns.

赣州市居民可支配收入差距研究—基于结构差异与县域差异视角

赣州市居民可支配收入差距研究—基于结构差异与县域差异视角

Globalization, inequality and welfare

This paper studies the welfare implications of trade opening in a world in which trade raises aggregate income but also increases income inequality, and in which redistribution needs to occur via a distortionary income tax-transfer system. We provide tools to characterize and quantify the effects of trade opening on the distribution of disposable income (after redistribution). We propose two adjustments to standard measures of the welfare gains from trade: a ‘welfarist’ correction inspired by the Atkinson (1970) index of inequality, and a ‘costly-redistribution’ correction capturing the efficiency costs associated with the behavioral responses of agents to trade-induced shifts across marginal tax rates. We calibrate our model to the United States over the period 1979–2007 using data on the distribution of adjusted gross income in public samples of IRS tax returns, as well as CBO information on the tax liabilities and transfers received by agents at different percentiles of the U.S. income distribution. Our quantitative results suggest that both corrections are nonnegligible: trade-induced increases in inequality of disposable income erode about 20% of the gains from trade, while the gains from trade would be about 15% larger if redistribution was carried out via non-distortionary means.

The distributional impact of health public expenditure in Italian regions: what happens when cost-effectiveness and quality matter?

We evaluate the implications of in-kind health transfers on household income distribution in Italy, factoring in the quality of government-provided healthcare in different regions (which are responsible for health policy). The novelty of this approach is that we explicitly acknowledge differences in the value of in-kind transfers resulting from cross-regional variations in service quality. The aim of this paper is twofold. First we adopt a fiscal federalism approach to assess the distributional implications of adding health public expenditure to the disposable income of Italian households and we compare the distributional results across regions. We then take a yardstick competition approach to evaluate the distributional implications of accounting for the quality and efficiency of services. To analyze the distributional impact of health public expenditure, we show the difference of the Gini index between final income and disposable income for each region and the progressivity index (Kakwani index). The re-ranking effect and the average in-kind benefit rate (that is the ratio of total in-kind transfers to disposable income) are also computed. Our analysis provides convincing evidence that when health services are evaluated at production cost, in-kind benefits reduce overall inequality on the distribution of disposable income. However, this effect is seen to be lower when the yardstick competition approach is applied to account for quality and cost-effectiveness, and, more importantly, it shows a geographical pattern.

The redistributive potential of taxation in Latin America

This study uses internationally comparable methodologies to analyse the distributional impact of income tax and public transfers in 17 countries of Latin America. The results indicate that fiscal policy plays a limited role in improving the distribution of disposable income; the Gini coefficient decreased by barely three percentage points after direct fiscal action. On average, 61% of this reduction was due to public cash transfers and the rest to direct taxes, reflecting the pressing need for personal income tax to be strengthened. Analysis of household surveys gives an indication of the potential effects of tax reforms aimed at increasing the average effective tax rate of the top income decile. Allocating this additional revenue to targeted transfers would produce significant results. Consequently, tax reforms must be evaluated bearing in mind how those resources are used.

Income Inequality in Europe Since the Crisis

Economic inequalities are engendered by a complex process, characterised by several steps and involving the interaction of several factors. The best indicator of individual economic well-being is disposable equivalised income. Evidence shows that welfare states retain a crucial function in Europe and that they have been central in limiting the detrimental effects of the financial crisis on disposable income distribution.

Application of microsimulation models in the analysis of taxes and social benefits in Croatia

Fiscal system microsimulation models enable the simulation of taxes, social insurance contributions, and social benefits, thus allowing researchers to predict the effects of a potential reform of these fiscal instruments on the distribution of disposable income, work incentives, as well as on budgetary revenue and expenditure. Although microsimulation models are one of the key tools for academic and policy analysis in other EU countries, such models have not been systematically developed and used in Croatia so far. In September 2015 researchers from the Institute of Public Finance therefore launched the research project ”Application of Microsimulation Models in the Analysis of Taxes and Social Benefits in Croatia” (hereinafter: the Project), which is outlined in this paper.