Nolan, Generating Prosperity for Working Families in Affluent Countries, Oxford University Press
Abstract
This chapter deals with redistribution by the state via cash transfers and direct taxes, which is influential on how incomes evolve for working-age households around and below the middle of the income distribution. It looks at trends in redistribution over recent decades across the OECD, and investigates via in-depth analysis of alternative strategies put forward by Atkinson (2015) applied to the UK how redistributive capacity can best be strengthened. One approach is to increase direct taxes in a progressive fashion and use the proceeds to enhance the generosity and impact of existing cash transfers for adults and children. More radically, such a tax increase and increased payments for children could be combined with a ‘basic income’ for all adults. The initial impacts of these measures on overall inequality and on incomes around and below the middle of the distribution are investigated via a micro-simulation exercise, and broader lessons for rich countries brought out.
