The overall redistributive effect and progressivity of the Portuguese tax-transfer system

  • Mariana Isabel Sanches Felizardo (Student)

Student thesis: Master's Thesis


The redistribution effect of the tax-transfer system is a first-order issue for policymakers. Thedegree of progressivity of taxes and transfers plays a central role in this respect. We applythe Kakwani index to evaluate the redistributive effect and progressivity of the overall tax andtransfer system - including cash transfers, direct taxes and indirect tax liabilities - for Portugalin 2010 and 2015. To the best of our knowledge, this computation is novel for the Portuguesecase. The first stage of our research project involves using parametric statistical techniquesto link expenditure data from the HBS dataset with information on income and transfers fromthe EU-SILC. After building this new dataset, we assess both the overall redistributive effectand progressivity of the tax-transfer system, as well as the contribution of each tax and benefitinstrument. Our empirical analysis shows that the overall redistributive effect translates intoan inequality reduction of approximately 6 and 7 Gini percentage points, respectively for 2010and 2015. The decrease in inequality is mainly driven by direct taxes, and this impact increasedbetween 2010 and 2015. Corroborating the existing literature, cash benefits and direct taxes areprogressive, while indirect taxes are regressive. The overall tax-transfer system is progressive. From 2010 to 2015, the Portuguese tax-transfer system became less progressive, yet the overall redistribution effect increased, mostly due to increased average direct tax rates.
Date of Award17 May 2023
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorNuno Alves (Supervisor)


  • Kakwani index
  • Redistributive effect
  • Progressivity
  • Direct taxes
  • Indirect taxes
  • Transfers
  • Parametric statistical matching
  • Portugal


  • Mestrado em Economia

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