An Examination of Public Income Redistribution

Abstract

AbstractThis study examines the extent of public income redistribution in a Scandinavian welfare state. We confirm previous findings where the redistributive effect of cash transfers is larger than that of in‐kind transfers, indirect taxes, and collective consumption, but their difference depends substantially on common methodological choices. First, we apply administrative data to identify actual use of in‐kind transfers and compare their redistributive effects to those from simpler allocation rules advocated in the distributional national account literature when actual transfers are not observed. Second, we show that the use of the insurance value (age and gender specific mean use) as an alternative allocation brings the redistributive effect of in‐kind transfers far closer to that of cash transfers. Third, we adjust for life cycle differences and show that while in‐kind transfers mainly redistribute income across age groups, redistribution from cash transfers takes place both within and across age groups.