Income Distribution and Social Security in an OECD Perspective*

This chapter investigates whether social policy measures have contributed to changes in inequality among Organisation for Economic Cooperation and Development (OECD) countries. It summarizes literature on the income distribution in OECD countries. The chapter discusses the proposition that social policy is one of the causes of increasing inequality. It presents a more detailed budget incidence approach for the Netherlands. Data availability, data consistency, and many factors in different studies make it hard to compare levels or even trends of income inequality across countries. The chapter reviews the evidence on cross national comparisons of annual disposable income inequality over twenty wealthy nations. The increasing income inequality observed for most Western economies over the last decades has coincided with many structural changes in the economic system. The chapter looks at only two of these indicators in the straightforward approach: social security expenditures as percentage of Gross Domestic Product, and replacement rates of unemployment benefits.