Redistribution - Progressivity and level - EUROMOD estimates

The table provides the total redistribution of the tax benefit system, computed as the Gini coefficient of initial income (original income + pensions) minus the Gini coefficient of disposable income. Since Gini coefficients range between 0 (no inequality) and 1 (maximum inequality), redistribution theoretically ranges from -1 to 1. However, it usually shows positive values, meaning that the Gini coefficient of initial income is higher (more inequal distribution) than the Gini coefficient of disposable income (more equal distribution).

In turn, total redistribution (RE) is decomposed using the Kakwani (1977, 1984) decomposition, as follows:

RE = L * P - RR

where:

• L measures the level of the tax-benefit system, computed as the share of taxes + SIC paid by the individual - other benefits over disposable income (i.e., the difference between initial and disposable income).
• P measures the progressivity (Kakwani index) of the tax-benefit system, computed as the concentration index of taxes + SIC paid by the individual - other benefits.
• RR measures re-ranking, as the difference between the concentration index of disposable income (sorted by initial income) and the Gini coefficient of disposable income.

All the income concepts are equivalised. 

For more information on the economic and socio-demographic concepts used, see the EUROMOD Glossary and the list of breakdown variables.

References:

Kakwani, N. C. (1977). Measurement of tax progressivity: an international comparison. The Economic Journal, 87(345), 71-80.

Kakwani, N. C. (1984). On the measurement of tax progressivity and redistributive effect of taxes with applications to horizontal and vertical equity, Advances in Econometrics, 3, 149-168.