Welfare State Expenditures and the Distribution of Child Opportunities

Abstract

This paper estimates the redistributive effects of welfare state expenditures on social and economic disparities in the economic well-being of citizens in ten nations. Data from the Organization for Economic Cooperation and Development (OECD) and other sources for cash and non-cash social welfare benefits (health and education benefits from third parties) are used to describe differences in the size and nature of welfare states and their distributional effects. The OECD data are combined with micro data on household incomes from the Luxembourg Income Study (LIS) both to estimate the redistributive effects of the expenditures and taxes and to construct measures of the differences in the relative standard of living among the population at various points in the income distributions of their countries. Estimates are provided for country populations as a whole and for three mutually exclusive groups: all persons; non-aged persons living with children; non-aged without children at home; and the elderly. These measures may be thought of as capturing the degree to which welfare states at the end of the 20th and dawn of the 21st century provide for the developmental needs and capabilities of their populations in terms of cash, access to health care and educational opportunity.

The results indicate a wide range of differences in levels of economic resources and support, within as well as between, nations and groups. The degree to which children have fair and equal opportunity chances; the degree to which the population has access to quality health care ; and the population groups who are most called upon( most taxed) to provide these benefits are all investigated here. Non-cash benefits are particularly important for low-income Americans: especially elders and children and their families and should not be taken for granted by analysts of the welfare state. Counting in kind benefits at government cost substantially reduces cross national differences in market and cash disposable incomes, but does not eliminate them. The results are very sensitive to how in-kind benefits are measured and valued.

JEL Classification: I18, I28, J13, O57