Redistribution through the lens of compositional inequality: novel measures and trends across the EU

The measurement of redistribution (how much taxes and transfers shape the income distribution with respect to what is engendered by the market) is complex and demands considerable methodological and policy attention. It is standard practice, especially in cross-country comparisons, to measure government redistribution by comparing the values of specific inequality indices (typically, the Gini coefficient) before and after taxes and transfers. This has severe theoretical limitations, however, in that it hinders understanding where the recipients of public transfers, or the taxpayers, lie along the income ladder. This Research Note (RN) proposes a method to overcome this issue by relying on the novel concept of compositional inequality, as well as on the income-factor concentration (IFC) index, recently developed in Ranaldi (2022).