Journal Article

What a difference a day makes: inequality and the tax and benefit system from a long-run perspective

March 29, 2019

Journal of Economic Inequality, March 2018, Vol. 16, Issue 1, pp. 23–40

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Most analyses of inequality and tax and benefit reforms are based on measures of individuals’ circumstances at a point in time. But strong age-profiles in earnings, among other characteristics that the tax and benefit system conditions upon, combined with individuals’ ability to transfer resources across time suggests that measuring circumstances over longer horizons may lead to a very different picture. In this article, we consider how our impression of inequality and the tax and benefit system changes when the horizon under consideration is extended. We show that inequality is lower, redistribution less extensive, and benefit receipt far more widespread from a longer-run perspective. The choice of accounting period can also lead to a very different assessment of the distributional impact of policy reforms. Our results show the importance of policymakers explicitly considering what it is they are trying to achieve through redistribution: the alleviation of short-run hardship or the reduction of lifetime inequality. While there may be good reasons to pursue both objectives, the group of people affected and the appropriate policy response will differ depending on which is prioritized.

Author(s)
Jonathan Shaw

Publication Details

Publisher

Springer

Date of Publication

March 29, 2019

Journal Article Online Date

December 29, 2018

ESRI Series

Journal Article

Rights

© The Author(s) 2017

Open Access

This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.