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FP6

AIM-AP — Result In Brief

Project ID: 28412
Funded under: FP6-CITIZENS

Better analysing income for enhanced policymaking

An EU-funded group of researchers advanced suggestions for improving on the measurement and cross-country comparisons of income distribution. This is important for establishing a more representative approach across countries when measuring poverty, inequality and social inclusion.
Better analysing income for enhanced policymaking
The 'Accurate income measurement for the assessment of public policies' (AIM-AP) project worked to improve on the measurement of income for better comparability and scope. This approach intended to afford a better analysis of policies regarding social inclusion, inequality and poverty, ultimately making them more applicable. Project partners focused on providing estimates of the distributional effects of imputed rent, public education and public healthcare services as non-cash income components.

AIM-AP thus included three sub-projects. The first, focused on distributional effects of non-cash incomes and implementation of a more comprehensive income definition, investigated the distributional effects of public education, public healthcare services, imputed rents for owner-occupied accommodation and public housing, and home production and employer-provided fringe benefits.

The second project used a series of national case studies to examine how tax evasion, errors in targeting social benefits and measurement errors affect data on income distribution. In the third project, researchers focused on how incorporating indirect taxes, together with direct taxes and social benefits, affects redistribution analysis.

The projects were designed so as to improve on comparisons of measurement and analysis across a set of EU countries. Some of the data generated as well as the method enhancements were made accessible through the EU tax-benefit model, EUROMOD.

One of the project's findings was that in comparison to cash incomes, non-cash incomes are far more equally distributed. Therefore, including them in the concept of resources results in lower measured levels of inequality and relative poverty. As such, the distributional effects of various policy simulations could change when taking into account the non-cash income components.

Other findings point to the need for income surveys to consider a broader information set regarding imputed rent, public education services and public healthcare transfers. One example is accounting for fringe benefits and home production of goods and services. These constitute near cash income components and can be accounted for relatively easily. This would facilitate comparisons between 'old' EU Member States boasting fully commercialised agriculture and 'new' Member States that many times are characterised by extensive consumption of own production.

AIM-AP also highlighted the need for more research efforts with regard to the appropriate use of equivalence scales, particularly when considering public services, and the long-term distributional effects of non-cash incomes.

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