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On the counterfactual problem of welfare state research: How can we measure redistribution?

Bergh, Andreas LU (2005) In European Sociological Review 21(4). p.345-357
Abstract
To measure welfare state redistribution, it is standard to compare the income distributions before and after taxes and transfers. This approach incorrectly assumes that the pre fisc distribution is independent of the welfare state. This paper identifies four sources of bias in the pre/post-approach: 1) Welfare states redistribute both between individuals and between generations, 2) Labor supply responses vary between socio-economic groups and depend on taxes and transfers, 3) The redistribution within social insurance schemes depends on the correlation between risk and income, and 4) Welfare states use public education to influence the distribution of earnings capabilities. I combine theoretical models, numeric simulations and empirics to... (More)
To measure welfare state redistribution, it is standard to compare the income distributions before and after taxes and transfers. This approach incorrectly assumes that the pre fisc distribution is independent of the welfare state. This paper identifies four sources of bias in the pre/post-approach: 1) Welfare states redistribute both between individuals and between generations, 2) Labor supply responses vary between socio-economic groups and depend on taxes and transfers, 3) The redistribution within social insurance schemes depends on the correlation between risk and income, and 4) Welfare states use public education to influence the distribution of earnings capabilities. I combine theoretical models, numeric simulations and empirics to examine the bias caused by these factors. Results indicate that the pre/post approach is more biased for welfare states with flat rate benefits and proportional taxation, that positively income-related benefits have a redistributive effect, and that public expenditure on primary and secondary education reduces inequality. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
European Sociological Review
volume
21
issue
4
pages
345 - 357
publisher
Oxford University Press
external identifiers
  • wos:000231761500003
  • scopus:25144494242
ISSN
0266-7215
DOI
10.1093/esr/jci024
language
English
LU publication?
yes
id
ca244f05-40a0-4148-a8f7-08b33b0bd1e1 (old id 891689)
date added to LUP
2008-01-11 11:27:51
date last changed
2017-05-28 03:46:19
@article{ca244f05-40a0-4148-a8f7-08b33b0bd1e1,
  abstract     = {To measure welfare state redistribution, it is standard to compare the income distributions before and after taxes and transfers. This approach incorrectly assumes that the pre fisc distribution is independent of the welfare state. This paper identifies four sources of bias in the pre/post-approach: 1) Welfare states redistribute both between individuals and between generations, 2) Labor supply responses vary between socio-economic groups and depend on taxes and transfers, 3) The redistribution within social insurance schemes depends on the correlation between risk and income, and 4) Welfare states use public education to influence the distribution of earnings capabilities. I combine theoretical models, numeric simulations and empirics to examine the bias caused by these factors. Results indicate that the pre/post approach is more biased for welfare states with flat rate benefits and proportional taxation, that positively income-related benefits have a redistributive effect, and that public expenditure on primary and secondary education reduces inequality.},
  author       = {Bergh, Andreas},
  issn         = {0266-7215},
  language     = {eng},
  number       = {4},
  pages        = {345--357},
  publisher    = {Oxford University Press},
  series       = {European Sociological Review},
  title        = {On the counterfactual problem of welfare state research: How can we measure redistribution?},
  url          = {http://dx.doi.org/10.1093/esr/jci024},
  volume       = {21},
  year         = {2005},
}