ASSESSING THE EFFECTIVENESS OF TAX AND TRANSFER POLICIES IN REDUCING GENDER INCOME DISPARITIES: A COMPARATIVE STUDY OF EUROPEAN WELFARE STATES

Abstract

This paper examines the relationship between welfare state policies and gender inequality by analyzing actual outcomes from a gender perspective. Previous studies have primarily focused on institutional indicators to assess the impact of welfare state policies, but this approach has limitations as the effects of policies can vary depending on context and the characteristics of women. Additionally, welfare states serve multiple purposes beyond gender equity, resulting in potentially inconsistent policies. To address these limitations, this paper adopts a different methodological approach, analyzing gender inequality in earnings and disposable income across European countries with different welfare regimes.

The study uses measures of disposable income before housing and childcare costs and focuses on the impact of separate policy instruments, specifically direct taxes and social transfers, in reducing the gender gap in earnings. The analysis accounts for the characteristics relevant to tax liabilities and benefit entitlements, such as earnings and care responsibilities, which lead to differential effects on women and men despite legal non-discrimination.

Methodologically, this paper makes two contributions. First, it proposes a method for measuring the disposable income of individuals within couples or multi-person households, allowing meaningful inclusion of both men and women in the analysis. Second, it employs the tax-benefit microsimulation model EUROMOD to improve the precision of income measurement, particularly for income taxes and social insurance contributions.

The findings suggest that the welfare state does not exhibit dualization along gender lines. Except for public pensions, all transfers contribute to reducing gender income gaps. However, the overall impact of taxes and benefits on gender income inequality is limited compared to earnings. Closing the gender gap in hours and wages through public services provision and reducing women's unpaid work at home