Technical documentation sheet
en
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| Indicator name |
Income inequality reducing effect of taxes and transfers |
| Periodicity |
Annual |
| Detailed definition |
This measures the extent to which social transfers and personal income taxes reduce market income inequality in the distribution of income in the EU Member States.
It is calculated as the difference between the income inequality measured using the S80/S20 calculated on the basis of a market income distribution, and the same measure, calculated for the same population, but based on a net disposable income definition. |
| Breakdowns |
This indicator can be broken down to isolate the effect of social transfers solely on reducing income inequality; likewise it can be broken down to isolate the effect of taxes solely on reducing income inequality. However, it should be noted that the two breakdowns will not sum as the calculation method does not respect the mathematical property of additivity, given the different bases for calculation |
| Comments/ Policy relevance |
Relevant to combatting poverty and social exclusion.
Some weaknesses have been identified in the right- and left tails of the distribution due to underreporting and sampling error. Sample size is robust for all EU Member States. |
| Source |
EU-SILC |
| SPC portfolio section |
Social inclusion – context |
| Key dimension |
Inequality |
| Context of use |
Relevant to assessing inequality, and combatting poverty and social exclusion.
This indicator measures the extent to which social transfers and personal income taxes reduce market income inequality in the distribution of income in the EU Member States. |
| Further details and related documents |
This indicator is calculated on the basis of the microdata collected in the EU-SILC survey. Household income is summed from all sources (employment, social transfers), the OECD equivalisation scale is applied and income is attributed to each household member to create a distribution. Shares are calculated on the basis of this distribution.
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