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« Business in Ireland is too Important to be left to Irish Business | Main | Low, Unequal and Going Backwards »

February 16, 2021

Comments

Seamus Coffey

Good piece Michael. The main material used was more fully set out earlier here:

http://economic-incentives.blogspot.com/2020/10/why-has-income-inequality-fallen-in.html

The question of whether disposable income inequality is rising/unchanged/falling is of interest in and of itself. It is not, nor could it be, all encompassing. A discussion of an important indicator is a long way from saying the focus should be on the particulars of one fact. Pretty much all findings could be pithily dismissed on that basis.

If the trend of income inequality in Ireland was similar to other developed countries, i.e. rising, I doubt the reaction would be that highlighting such a rising inequality trend misses the point because Irish living standards are higher than several countries that have lower income inequality.

Eyeballing the Eurostat data would suggest there is probably no relationship between measures of income inequality, such as the gini coefficient, and measures of living standards, such as real actual individual consumption per capita. Measures of inequality and measures of average living standards can show different things because they are different things.

The Danish example is interesting and it was pointed out that other countries have made different choices. Starting at disposable income potentially misses one of those: income tax. Housing for low-income households is also a notable counterpoint.

Over the last 30 years, Ireland's system has evolved to one with a steeply progressive income tax system (at least within the range of low to middle incomes) and a greater reliance on cash transfers. Was there much objection when people were "taken out of the tax net" or transfer rates were increased?

In the mid-80s, the Irish tax system was estimated to have reduced the gini-coefficient by 0.045 points. In Denmark it was 0.028 points. Latest OECD figures show that in Ireland taxes reduced the gini co-efficient by 0.085 points, whereas the reduction in Denmark is 0.043.

Over the last 30 years we have increased the impact of disposable income inequality from income taxes by almost as much as the current Danish system does in total. An explicit intention of this was to reduce overall income inequality: the data suggest this was achieved.

Pointing to the fact that income inequality in Ireland has fallen is not missing the point. It was the point! Is it end? No. It wasn't suggested it was. Maybe it could serve as a setting off point for a discussion of whether we made the right choices with a policy path that was set in train with government policy papers in the late-1980s and ultimately delivered via government policy decisions through to the early-2000s. But such a discussion should at least set off from the right point.

Charles Hardy

Was hralth service access and comprable outcomes assessed fir gini?

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