Inequality and Redistribution: A Broader Approach Valuating Public Services with an Application to France

Who benefits from public transfers in France after paying taxes? We answer this question through an extended approach of redistribution, allocating 100% of national income and transfers between various categories of individuals using new micro-founded methods to monetize in-kind transfers and collective public services. We find that 60% of households are net beneficiaries of extended redistribution. By contrast, the proportion is only one-third with the usual monetary approach, as important items such as public services or VAT are not accounted for. The impact of redistribution on attenuation of inequalities is two times larger than with the usual monetary approach, with a major role for health and education. An analysis over age groups highlights a “paradox of horizons”: 90% of individuals over the age of 60 receive more than they pay, mainly via retirement pensions and health, versus less than 50% for those under the age of 60. For individuals without a diploma, the income gap between people aged 50 to 64 and the young falls from 130% before transfers to 25% after transfers; and for individuals with a bachelor’s degree, from 150–50%. Other types of analysis, such as family, gender, geographic area or social class, confirm the importance of the extended approach to properly assessing redistribution. Classification JEL: E01, D63, O57.