Who benefits from public services? Novel evidence and implications for inequality measurement

Type Working Paper
Title Who benefits from public services? Novel evidence and implications for inequality measurement
Author(s)
Publication (Day/Month/Year) 2024
URL https://amory-gethin.fr/files/pdf/Gethin2024SouthAfrica.pdf
Abstract
Traditional inequality statistics focus on disposable income, ignoring transfers received by households in the form of public services. This article provides novel evidence on the distribution of in-kind transfers and its implications for inequality measurement. I combine historical budget data with rich microdata to estimate the distributional incidence of all major public services provided in South Africa from 1993 to 2019. All government transfers reduce inequality, but with large variations. The poorest 50 percent consume 60 percent of public education, 50 percent of healthcare, 40 percent of police and local government services, and only 7percent of transport infrastructure. There have been enormous improvements in public services since the end of apartheid: in-kind transfers can account for half of real income growth among low-income households since 1993. These results have major implications for recent debates on inequality measures consistent with macroeconomic growth: typical assumptions made in the literature underestimate the rise of redistribution by 60 percent.

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