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A lost decade?: decomposing the effect of 2001-11 tax-benefit policy changes on the income distribution in EU countries

Hills, John, Paulus, Alari, Sutherland, Holly and Tasseva, Iva (2014) A lost decade?: decomposing the effect of 2001-11 tax-benefit policy changes on the income distribution in EU countries. ImPRovE working papers (14/03). ImPRovE, Antwerp, Belgium.

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Abstract

This paper examines the extent to which tax and benefit policy changes introduced in the period 2001-11 had a poverty- or inequality-reducing effect. We assess whether the period was indeed a “missed opportunity” for policy changes to make a difference to poverty reduction since the Lisbon Treaty, given the general lack of improvement shown by poverty indicators. Our analysis uses the tax-benefit model EUROMOD and covers seven diverse EU countries: Belgium, Bulgaria, Estonia, Greece, Hungary, Italy and the United Kingdom. We apply the Bargain and Callan (2010) decomposition approach, extending it by separating the effect due to structural policy changes and the indexation effect. We find that the latter was typically more effective in alleviating poverty and inequality than changes to the structure of policies. In fact, most of the structural changes that governments introduced, especially in the 2007-11 crisis-onset period, had poverty and inequality-increasing effects. We find considerable variation between countries in how different policy instruments have been adjusted, and in the effects of these adjustments by income, by age and by household composition, showing the importance of understanding them together, rather than discussing just some in isolation.

Item Type: Monograph (Discussion Paper)
Official URL: http://improve-research.eu/
Additional Information: © 2014 The Authors
Divisions: Social Policy
STICERD
Centre for Analysis of Social Exclusion
Subjects: J Political Science > JN Political institutions (Europe)
Sets: Departments > Social Policy
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Research centres and groups > Centre for Analysis of Social Exclusion (CASE)
Date Deposited: 02 Oct 2014 11:41
Last Modified: 05 Feb 2020 00:30
Projects: Progress grant no. VS/2011/0445, 290613 (project title: ImPRovE)
Funders: Directorate General for Employment, Social Affairs and Inclusion of the European Commission, European Union’s Seventh Framework Programme (FP7/2012-2016), ImPRovE
URI: http://eprints.lse.ac.uk/id/eprint/59605

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