Impact of Redistributive Policies on Household Income Distribution

1
Impact of Redistributive Policies on Household
Income Distribution

• Ms. Reddy Ng
• Principal Economist,
• Economic Analysis and Business Facilitation Unit,
  
• Financial Secretarys Office,
• HKSAR Government

2
Outline

• Original Income Distribution
• Redistributive Policies
• Framework of Analysis
• Impact of Taxation
• Impact of Social Benefits
• Impact of Taxation Social Benefits
• Key Observations
• Limitations
• Policy Initiatives

3
Income Distribution
4
Reasons for Greater Income Disparity

• Economic Factors
• Social Factors

5
Income Redistributive Policies

• Taxation
• Income Tax
• Profits Tax
• Rates Government Rent
• Others
• Social Benefits
• Education
• Health
• Public Housing
• Labour
• Welfare

6
Revenue Profile in 2007-08
7
Recurrent Public Expenditure (2008-09 Budget)
8
Framework of Analysis
Original Household Income
Social Benefits
Taxation
(-)
Salaries Tax, Property Tax, Rates Government
Rent
Post-tax Household Income
()
Education, Housing Medical Benefits
Post-tax Post-social Transfer Household Income
9
Impact of Taxation

• Salaries Property Taxes Rates Government
  Rent

10
Post-tax Income Distribution
11
Gini Coefficients before and after
12
Impact of Social Benefits

• Housing, Education Medical Benefits

13
Post-social Transfer Income Distribution
14
Post-tax Post-social Transfer Income Distribution
15
Gini Coefficients before and after
16
Key Observations

• Redistributive policies lowered income disparity
• Stronger redistributive effect over time
• Social benefits were more effective in reducing
  income disparity than taxation
• Smaller per capita income disparity
• Greater redistributive effect on a per capita
  basis

17
Limitations

• Under-estimated government action
• Only included 23.7 of government operating
  revenue (49 billion)
• Only included 36.4 of public expenditure (91
  billion)
• Under-estimated original Gini-Coefficient
• Informal transfer and most welfare payment were
  included in original household income

18
Policy Initiatives 2008/09 Budget

• An additional month of standard CSSA payment
• Adjustment of CSSA payment rates ahead of the
  normal schedule this year
• A one-off grant of 3,000 to each Old Age
  Allowance recipient
• Waiver of one months rent for public housing
  tenants
• Electricity charge subsidy and
• Relaxation of eligibility criteria and the
  subsidy period of the Pilot Transport Support
  Scheme.

19
Other Policy Initiatives

• Employment Creation
• Large-scale infrastructure projects
• Strengthening of training/retraining
• Development of social enterprises
• Youth
• Provision of 12-year free education
• Elderly
• Strengthening of residential care and district
  community services
• Conduct studies on how to improve the Old Age
  Allowance Scheme

20

• Thank you

21
Supplementary Information (1)
22
Supplementary Information (2)