Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers

Paulus, Alari; Tasseva, Iva

doi:10.1111/obes.12354

Cited by 42 publications

(55 citation statements)

References 50 publications

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“…Our results for the overall impact on poverty and inequality of policy changes are also consistent with the existing evidence for some of these countries and/or the crisis period: e.g. for the UK: Adam and Browne, ; Bargain et al , , for Belgium: Decoster et al, , for EU countries during the crisis: De Agostini et al , ; Paulus and Tasseva, .…”

Section: Resultssupporting

confidence: 90%

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Paulus

Sutherland

Tasseva

2019

Review of Income and Wealth

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We assess how tax-benefit policy developments in 2001-11 affected the household income distribution in seven EU countries. We use the standard microsimulation-based decomposition method, separating further the effect of structural policy changes and the uprating of monetary parameters, which allows us to measure the extent of fiscal drag and benefit erosion in practice. The results show that despite different fiscal effects, policies overall mostly reduced poverty and inequality and both types of policy developments had sizeable effects on the income distribution. We also find that the uprating of monetary parameters not only had a positive effect on household incomes, meaning fiscal drag and benefit erosion were avoided, but generally also contributed more to poverty and inequality reduction than structural policy reforms.JEL Codes: D31, H23, I32 Toon Vanheukelom and participants at workshops (Canazei, Colchester, Seville) and conferences (ImPRovE, Antwerp; SEEK, Mannheim; EALE, Ljubljana; IMA, Maastricht). The results presented here are based on EUROMOD version F6.36. EUROMOD is maintained, developed and managed by ISER at the University of Essex, in collaboration with national teams from the EU member states. We are indebted to the many people who have contributed to the development of EUROMOD. The process of extending and updating EUROMOD

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Section: Resultssupporting

confidence: 90%

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Paulus

Sutherland

Tasseva

2019

Review of Income and Wealth

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“…The ability of European tax-benefit systems to stabilise income has been studied by Dolls et al (2012) who found that stabilisation of disposable incomes ranged from 25 per cent to 56 per cent of the overall change in market incomes. Stabilisation of income inequality has also been studied and found to differ substantially from stabilisation of income (Callan et al 2018;Paulus and Tasseva 2018). In this section, we consider the inequality stabilization and redistributive capabilities of each of the tax-benefit systems in the EU-27.…”

Section: The Stabilizing Capability Of European Tax-benefit Systemsmentioning

confidence: 99%

Demographic change and the European income distribution

et al. 2019

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This paper assesses the effect of key demographic changes (population ageing and increasing educational attainment) that are expected by 2030 on the income distribution in the EU-27 and examines the potential of tax-benefit systems to counterbalance negative developments. Theory predicts that population ageing should increase income inequality, while the effect of upskilling is more ambiguous. Tax-benefit systems may stabilize these expected changes though this is largely an empirical question given their typically complex nature. We use a decomposition technique to isolate the effect of projected demographic change on income inequality and poverty from the reaction of the labor market to this demographic change through wage adjustments. Our results show that demographic change is likely to lead to increasing inequality while related wage adjustments work mainly in the opposite direction. Changes to projected relative poverty are minimal for most countries. With a few exceptions, EU tax-benefit systems are able to absorb most of projected increase in market income inequality.

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“…Furthermore, means-tested benefits have been shown to be effective in providing a much-needed safety net for households during economic downturns (Bitler et al 2017;Bitler and Hoynes 2016). Recent analysis has also highlighted the importance of tax and benefit automatic stabilisers for income redistribution (Paulus and Tasseva 2020).…”

Section: Introductionmentioning

confidence: 99%

Did the UK Policy Response to COVID-19 Protect Household Incomes?

Brewer

Tasseva²

2020

SSRN Journal

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We analyse the UK policy response to Covid-19 and its impact on household incomes in the UK in April and May 2020, using microsimulation methods. We estimate that households will lose a substantial share of their net income (7% on average). As a proportion of income, the losses due to the crisis are largest for previously higher-income families. However, the overall impact of the crisis on income inequality is small. Earnings subsidies (the Coronavirus Job Retention Scheme) will protect household finances and provide the main insurance mechanism during the crisis. Besides subsidies, Covid-related increases to state benefits, as well as the automatic stabilisers in the tax and benefit system, will play an important role in mitigating the income losses. Analysing the impact of a near-decade of austerity on the UK safety net, we find that, compared to 2011 policies, the 2020 pre-Covid tax-benefit policies would have been less effective in insuring incomes against the shocks. The extra benefit spending in response to the pandemic will strengthen the safety net, providing important additional income protection.

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Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers

Cited by 42 publications

References 50 publications

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Demographic change and the European income distribution

Did the UK Policy Response to COVID-19 Protect Household Incomes?

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