Fiscal redistribution in comparative perspective: Recent evidence from the Luxembourg income study (LIS) data centre

The aim of this chapter is to present an overview of recent trends in income inequality and government redistribution in twenty developed countries, using data that have been computed from household-level income surveys available from the Luxembourg Income Study Database (LIS). The central accomplishment of the LIS, which was established in 1983, has been to harmonise household-level income surveys produced by national statistical agencies and other authoritative bodies so that they conform to a common definitional framework. LIS micro-data are then made available to researchers, who can use them to calculate, among other things, the redistributive effect of direct taxes and various types of social transfer. LIS data are available for ten waves, centred on 1970, 1975, 1980, 1985, 1990, 1995, 2000, 2004, 2007 and 2010. However, not every country is represented in every wave and some countries include more than one year in a single wave. The LIS has compiled data on a wide variety of sources of private sector income, including wages and salaries, self-employment income, interest and dividends, and rental income and royalties. It also measures income from a large number of individual public social transfers, including pensions, unemployment benefits, child allowances and means-tested public assistance. Finally, most LIS surveys account for the most important direct taxes, including income taxes and social insurance contributions. The data presented in this chapter update and extend our ‘Fiscal Redistribution Dataset’, which has provided information on a number of aspects of inequality reduction in developed countries by way of taxes and social transfers. The dataset was first compiled from LIS micro-data in 2005. In 2008, it was updated to reflect changes in LIS methodology and to include several newly available income surveys. Some of our measures were further extended and updated in 2011 by Koen Caminada and Chen Wang. Our revised dataset, as well as Caminada and Wang’s, are available on the LIS website and have been widely used by researchers interested in income inequality and government redistribution. The purpose of this chapter is to describe the results of a thorough update of our data on fiscal redistribution which we have recently undertaken, an update in which we have not only added new figures but also recalculated earlier ones to reflect recent changes in LIS methodology. For a number of reasons, we believe this is an opportune time to update our dataset ‘from the ground up’.