The distributional impact of in-kind public benefits in European countries

Summary

International comparisons of inequality based on measures of disposable
income may not be valid if the size and incidence of publicly provided
in-kind benefits differ across the countries considered. The benefits
that are financed by taxation in one country may need to be purchased
out of disposable income in another. We estimate the size and incidence
of in-kind or “noncash” benefits from public housing subsidies,
education, and health care for five European countries using comparable
methods and data. Inequality in the augmented income measure is
dramatically lower than in disposable income, with the effects of the
three components varying in importance across countries. Adapting
equivalence scales to take proper account of differences in needs for
health care and education across population members reduces the scale of
the effect, but does not eliminate it. © 2010 by the Association for
Public Policy Analysis and Management.