13.
CORE GOVERNMENT RESULTS
Income redistribution
Income inequality has a profound impact not only on
individuals’ and families’ living conditions and their health
status, but also on societies as a whole by threatening
social cohesion, curbing economic growth and weakening
trust in institutions. Most OECD member countries have
adopted a mixture of public policies to reduce income
inequality in society and its long-term effect on economic
progress. These include social protection and insurance
systems financed through a combination of cash transfers
and progressive income taxes. They have also used
specific fiscal stimulus packages to boost demand and
cushion poorer households from the impact of crises
such as the COVID-19 pandemic. These measures, aimed
at addressing income inequality by redistributing income
between rich and poor, but also between generations,
could also provide support to age groups in greater
need. Finally, other elements, such as wealth taxation,
could also increase the effectiveness of redistributive
policies (Kuypers et al., 2021).
In 2018, average income inequality among the working-
age population of OECD countries, as measured by the
Gini coefficient, was 0.41 before taxes and transfers, and
0.31 after government intervention in the form of taxes and
transfers (on a scale where 0 represents perfect equality
and 1 perfect inequality). Redistribution levels are the
highest in countries with consolidated welfare states, such
as Ireland (39% difference in Gini before and after taxes
and transfers), Belgium (38%) and Finland (36%). At the
other end of the spectrum, Chile (5%) has the lowest level
of income redistribution after government intervention
(Figure 13.7).
Among OECD countries with available information, the Gini
coefficient after taxes and transfers remained practically
unchanged between 2012 and 2018. However, the average
hides significant changes in some countries. For example,
inequality fell significantly in Estonia (6.5 points), Greece
(3.2) and Portugal (2.8), while it increased slightly in
Switzerland (1.7 points), Denmark (1.6) and Finland (1.5)
(Figure 13.8).
In 2018, 11.2% of the population in OECD countries could
be considered poor in terms of relative income poverty
after taxes and transfers. The figures range from over
17% in the United States and Latvia to less than 6% in
Iceland. Between 2012 and 2018 relative income poverty
increased the most in Latvia (4.2 p.p.) Germany (2 p.p.)
and the Netherlands (1.4 p.p.) while it decreased most
significantly in Greece (2.8 p.p.), Portugal (2.6 p.p.) and
Mexico (2.30 p.p.) (Figure 13.9).
210
Methodology and definitions
Data are drawn from the OECD Income Distribution
Database (oe.cd/idd) consulted on 1 March 2021. The
Gini coefficient is a standard measure of inequality
representing the income distribution of the population
within a given country. It takes the value of 0 when
all households have identical income and 1 when
one household has all the income. Redistribution of
income is measured by comparing Gini coefficients
for household market income (i.e. total income from
market sources not adjusted for public cash transfers
and household taxes) and for household disposable
income (i.e. net of direct government transfers and
direct taxes) of the working-age population. The
poverty rate after taxes and transfers is the share of
people whose income falls below the poverty line,
taken to be 50% of the current median equivalised
disposable income of the entire population.
Further reading
Kuypers, S., F. Figari and G. Verbist (2021), “Redistribution
from a joint income-wealth perspective: Results from 16
European OECD countries”, OECD Social, Employment and
Migration Working Papers, No. 257, OECD Publishing, Paris,
https://doi.org/10.1787/22103c5e-en.
Causa, O., J. Browne and A. Vindics (2019), “Income
redistribution across OECD countries: Main findings and
policy implications”, OECD Economic Policy Papers, No. 23,
OECD Publishing, Paris, https://doi.org/10.1787/3b63e61c-en.
OECD (2016), “Income inequality remains high in the face
of weak recovery”, Income Inequality Update, November
2016, www.oecd.org/social/OECD2016-Income-Inequality-
Update.pdf.
Figure notes
13.7. Countries are ranked from the highest to the lowest difference
before and after taxes. All Gini coefficients are based on the 2012
new income definition and are for the working-age population,
disregarding the effect of public pension schemes. Data for
Chile, Denmark, Germany, Hungary, Ireland, Iceland, Switzerland
and the United States are for 2017 rather than 2018. Data for
the Netherlands and Russia are for 2016 rather than 2018. Data
for Costa Rica are for 2019 rather than 2018.
13.8. Data for Chile, Estonia, Sweden and the United States are for 2013
rather than 2012. Data for Russia are for 2011 rather than 2012.
13.9. Data for Chile, Denmark, Germany, Hungary, Iceland, Ireland,
Italy, Switzerland and the United States are for 2017 rather than
2018. Data for Mexico, the Netherlands and Romania are for 2016
rather than 2018.
Government at a Glance 2021 © OECD 2021
 13. CORE GOVERNMENT RESULTS
Income redistribution

13.7. Differences in household income inequality among the working-age population pre and post-tax
and government transfers, 2018
After taxes and transfers Before taxes and transfers
Gini coefficient
0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
L
L
N
A
T
C
K
V
X
T
D
U
P

CD
R
L
N
S

E
A
R
E
K
N
R
A
T
A
U
L
E
R
L

I
CR
IR
BE

PO
PR

IS

CH
SL

CZ

CH
AU

IT

SW

ES
LV
GR

ES
DN

AU

RU
LU

US
SV
FR
FI

DE

NO

HU

GB

IS
NL

KO
CA

LT

RO
OE
Source: OECD Income Distribution (database).
12 https://doi.org/10.1787/888934259237

13.8. Difference after taxes and transfers in the Gini coefficient score for the working-age population,
between 2012 and 2018
0.03
0.02
0.01
0
-0.01
-0.02
-0.03
-0.04
-0.05
-0.06
-0.07
T

E
E

V
CD

IS
IR

PO

CH

CH
PR
ES

SL
CZ

SW

IT

AU
LV
GR

ES

AU

DN
US
SV

FR

FI
IS

DE

HU

NO

GB
NL

LT
CA

OE

Source: OECD Income Distribution (database).

12 https://doi.org/10.1787/888934259256

13.9. Relative poverty rate after taxes and transfers, 2018 and 2012

% 2012 2018
25

20

15

10

0
L
E
A
R
D
L
N
K
N
N
E
K
L

I
U
A
A
R
R
EX

L
T
U
P
A
S
C
N
R
X
CD

U
T
L
T
E

CR
BE
CH

PO

IR

IS
CH
PR
ES

CZ
AU
IT

SW
LV

ES

GR
AU

DN
US

LU

SV
FR

BR
FI
IS

DE

NO

RO
KO

GB

HU
NL
LT

SV
CA
M

OE

Source: OECD Income Distribution (database).

12 https://doi.org/10.1787/888934259275

Government at a Glance 2021 © OECD 2021 211

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Please cite this chapter as:

OECD (2021), “Income redistribution”, in Government at a Glance 2021, OECD Publishing, Paris.

DOI: https://doi.org/10.1787/637b3a40-en

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