Redistributive efficiency in 28 developed economies

Abstract:

This article analyses the redistributive efficiency of social transfers and direct taxation in a panel of 28 developed economies during the period 1995-2010. In order to explore how redistribution is achieved through these fiscal policies, a two-stage approach is applied.

First, we evaluate their redistributive efficiency – the degree of redistribution attained for a given level of transfers and taxes – using data envelopment analysis (DEA). We find lower redistributive efficiency in Southern Europe and the United States and higher efficiency levels in the Nordic and Central European countries and Australia.

Second, we use panel regression analysis to identify the determinants of efficiency differences and reveal the crucial role of government quality as well as factors affecting the redistributive profile of fiscal policies.