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The Impact of Publicly Provided Services on the Distribution of Resources: Review of New Results and Methods

Author

Listed:
  • Gerlinde Verbist

    (University of Antwerp)

  • Michael Förster

    (OECD)

  • Maria Vaalavuo

    (European University Institute)

Abstract
This paper looks at how the income distribution in countries changes when the value of publicly-provided services to households is included. We consider five major categories of public services: education, health care, social housing, childcare and elderly care. On average across OECD countries, spending on these “in-kind” benefits accounts for about 13% of GDP, slightly more than the spending on cash transfers – but with considerable cross-country variation. Broadening the income concept to account for in-kind benefits considerably increases households’ economic resources: in a typical OECD country, the average annual household income would be close to USD 28 000, rather than USD 22 000 in purchasing power parities. But public services also contribute to reducing income inequality, by between one-fifth and one-third depending on the inequality measure. Mexico and, according to most inequality measures, the United States, Portugal, Ireland, and the United Kingdom record higher reduction rates, while Slovenia records lower ones. Across all countries, redistributive effects are stronger among specific population groups at higher risk of poverty. Between 2000 and 2007, the redistributive impact of public services remained stable overall. However, the impact became stronger in countries where the share of services in household income increased significantly, while it weakened in those countries where this share decreased. The paper suggests that publicly provided services fulfil an important direct redistributive role in OECD countries. Ce document examine la façon dont la distribution des revenus varie dans les pays lorsque la valeur des services publics fournis aux ménages est inclue. L'imputation de la valeur de ces services dans les revenus des ménages et l'analyse de leur potentiel redistributif posent des défis méthodologiques importants, tels que l’estimation et l’allocation de ces services aux bénéficiaires, ou l'ajustement de l'échelle d'équivalence aux besoins associés à ces services. Nous présentons des analyses de sensibilité, en utilisant deux approches innovatrices mises en avant dans la littérature. Le document considère cinq grandes catégories de services publics : éducation, santé, logement social, garde d'enfants et soins aux personnes âgées. En moyenne, dans les pays de l'OCDE, les dépenses relatives à ces prestations «en nature» s’élèvent à environ 13% du PIB, soit légèrement plus que les dépenses relatives aux transferts en espèces - mais avec beaucoup de variations entre pays. Elargir le concept de revenu pour tenir compte des avantages «en nature» augmente considérablement les ressources économiques des ménages : dans un pays typique de l'OCDE, le revenu annuel moyen des ménages serait proche de 28 000 USD, plutôt que 22 000 USD en parité de pouvoir d’achat. Mais les services publics contribuent également à réduire l'inégalité de revenus, d’un cinquième à un tiers en fonction de la mesure d’inégalité. Le Mexique et, selon la plupart des mesures d’inégalités, les États-Unis, le Portugal, l'Irlande et le Royaume-Uni enregistrent des taux de réduction plus élevés, tandis que la Slovénie enregistre des taux de réduction plus faibles. Dans tous les pays, les effets redistributifs sont plus forts parmi les groupes de population spécifiques à risque de pauvreté plus élevé. Entre 2000 et 2007, l'impact redistributif des services publics est resté globalement stable. Toutefois, l'impact est devenu plus fort dans les pays où la part des services dans les revenus des ménages a augmenté de manière significative, alors qu'il s’est affaibli dans les pays où cette part a diminué. Le document suggère que les services publics remplissent un rôle de redistribution directe important dans les pays de l'OCDE.

Suggested Citation

  • Gerlinde Verbist & Michael Förster & Maria Vaalavuo, 2012. "The Impact of Publicly Provided Services on the Distribution of Resources: Review of New Results and Methods," OECD Social, Employment and Migration Working Papers 130, OECD Publishing.
  • Handle: RePEc:oec:elsaab:130-en
    DOI: 10.1787/5k9h363c5szq-en
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