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Home Publications The case for taking a life-cycle perspective: inequality, redistribution, and tax and benefit reforms

The case for taking a life-cycle perspective: inequality, redistribution, and tax and benefit reforms

Report

Most analysis of the impact of taxes and benefits on households is cross-sectional, with individuals classified as rich or poor, and gains and losses calculated, using a single snapshot of data. In this report, we argue the case for taking a longer-run perspective. In particular, we show that income and circumstances over longer horizons (such as several years) are likely to form a better basis for measuring living standards. We then demonstrate how common measures of inequality and redistribution, and distributional analyses of tax and benefit reforms, are affected by taking a longer-run perspective. Results from the two perspectives may look quite different from each other and, as a result, we could end up with contrasting impressions of the extent to which the tax and benefit system redistributes from rich to poor.

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Presentation
This presentation was given at the RES conference 2015.
IFS Working Paper W15/01
We discuss two alternative approaches to constructing data on complete adult life-cycles using an 18-year panel: a splicing approach (closely related to imputation) and a microsimulation approach. We find the microsimulation approach is to be preferred because it allows us to correct for observable ...
IFS Working Paper W14/21
This working paper looks at the role taxes and transfers play in redistributing resources and providing insurance across individuals and across the lifecycle.
Press release
Almost three times as many people interact with the benefit system over an 18 year period than in a single year on average. As most analyses of benefit reforms are based on measures of individuals’ circumstances at a particular point in time, often a week or a month, they will understate the ...