Income Inequalities in Ireland and Poland: The Role of Taxes and Social Transfers

Abstract

Even though Ireland and Poland differ in their GNI levels per capita, economic history and economic systems, their levels of income inequality calculated on disposable income were very similar in 2016. However, there is a lack of current research comparing these countries from the perspective of tax-benefit systems that alleviate inequality. Therefore, this paper seeks to answer the research question of whether the differences in welfare state regimes that shape tax-benefit systems in Poland and Ireland are reflected by the role the taxes and social transfers play in tackling inequality. Our study is based on microdata from the European Union Statistics on Income and Living Conditions (EU-SILC) survey. We apply a factor decomposition to determine what roles various factor components play in determining overall inequality. The results reveal that the redistributive effect was stronger in Ireland, resulting in greater income inequality reduction than in Poland through policies affecting the unemployed, families and taxes.