Reducing Inequality and Poverty in Portugal

OECD Economics Department Working Papers, No. 1258

28 Pages Posted: 23 Nov 2016

See all articles by Jens Matthias Arnold

Jens Matthias Arnold

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Carlos Farinha Rodrigues

Cemapre, Lisbon School of Economics and Management, Universidade de Lisboa; ISEG Lisbon School of Economics and Management; University of Lisbon

Date Written: August 21, 2015

Abstract

Portugal has one of the most unequal income distributions in Europe and poverty levels are high. The economic crisis has halted a long-term gradual decline in both inequality and poverty and the number of poor households is rising, with children and youths being particularly affected. Unemployment is one of the principal reasons why household incomes declined. The tax and benefit system alleviates both inequality and poverty significantly. The tax system is markedly progressive, and recent tax reforms have likely increased this progressivity. Transfer payments, especially non-pension benefits, are reducing inequality and poverty in a fairly efficient way. Nonetheless, a number of adjustments could strengthen the equalising role of the benefit system, which is generally biased towards benefits for elderly people, while families with children should receive more support. The education system should provide more support to students at risk of falling behind to reduce grade-repetition and drop-out rates, while further increasing class sizes would be a reasonable way to generate savings without affecting learning progress much. Scaling up vocational courses and adult education, including in the context of active labour market policies, could improve the capacity of many households to generate income and lead to a more equitable income distribution.

Keywords: tax, pension, wages, distribution, education, transfers

Suggested Citation

Arnold, Jens Matthias and Farinha Rodrigues, Carlos, Reducing Inequality and Poverty in Portugal (August 21, 2015). OECD Economics Department Working Papers, No. 1258, Available at SSRN: https://ssrn.com/abstract=2873041

Jens Matthias Arnold

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Carlos Farinha Rodrigues (Contact Author)

Cemapre, Lisbon School of Economics and Management, Universidade de Lisboa ( email )

Rua do Quelhas, 6
Lisboa, 1200
Portugal
351-213925968 (Phone)

HOME PAGE: http://faculty.iseg.ulisboa.pt/carlosfr

ISEG Lisbon School of Economics and Management ( email )

Rua do Quelhas 6
Lisboa, 1200-781
Portugal

HOME PAGE: http://faculty.iseg.ulisboa.pt/carlosfr

University of Lisbon ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

HOME PAGE: http://www.iseg.ulisboa.pt/~carlosfr

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