Two: Poverty, inequality and redistribution

This chapter sets the scene for the rest of the book by examining the evidence on income poverty and income inequality. The assessment includes the results of micro-simulation, which allows one to separate the effects of tax-benefit policy from the effects of demographic and labour-market changes, addressing the tricky question of the counterfactual: what would have happened in the absence of policy changes? The chapter also looks at the distributional impact of public expenditure on benefits in kind such as health and education. Inequality measures generally exclude benefits in kind, but as public spending tends to be higher on poorer households, increases in spending can make a significant difference to the state’s overall redistributive impact.

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