To assess the impact of tax-bene…t policy changes on income distribution over time, we suggest a methodology based on counterfactual simulations. We start by decomposing changes in inequality/poverty indices into three contributions: reforms of the tax-bene…t structure (rules, rates, etc.), changes in nominal levels of market incomes and tax-bene…t parameters (bene…t amounts, tax bands, etc.), and all other changes in the underlying population (market income inequality, demographic composition, employment level, etc.). Then, the decomposition helps to extract an absolute measure of the impact of tax-bene…t changes on inequality when evaluated against a distributionally-neutral benchmark, i.e. a situation where tax-bene…t parameters are adjusted in line with income growth.We apply this measure to assess recent policy changes in twelve European countries. Finally, the full decomposition allows quantifying the relative role of policy changes compared to all other factors. We provide an illustration on France and Ireland and check the sensitivity of the results to the decomposition order.Key Words : Tax-bene…t policy, inequality, poverty, decomposition, microsimulation. JEL Classi…cation : H23, H53, I32Acknowledgement: We are grateful to Tony Atkinson and Brian Nolan for useful comments. We are indebted to all past and current members of the EUROMOD consortium as well as to those involved in the development of the model. Any remaining errors, results produced, interpretations or views presented are the authors' responsibility. Simulations performed in this study rely on national micro-data sets and on the European Community Household Panel

Ringen has advocated the use of both income and deprivation criteria in identifying those excluded from society due to lack of resources, a widely accepted definition of poverty. We illustrate with Irish data how this might be done, paying particular attention to how appropriate indicators of deprivation are to be selected. The results show that employing both income and deprivation criteria rather than income alone can make a substantial difference to both the extent and composition of measured poverty. This highlights the restrictive nature of poverty conceived in terms of exclusion rather than minimum rights to resources.

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This paper examines the impact of the economic crisis and the policy reaction on inequality and relative poverty in four European countries, namely France, Germany, the UK and Ireland. The period examined, 2008 to 2013, was one of great economic turmoil, yet it is unclear whether changes in inequality and poverty rates over this time period were mainly driven by changes in market income distributions or by tax-bene…t policy reforms. We disentangle these e¤ects by producing counterfactual ("no reform") scenarios using tax-bene…t microsimulation and representative household surveys for each country. For the …rst stage of the Great Recession, we …nd that the policy reaction contributed to stabilizing or even decreasing inequality and relative poverty in the UK, France and especially in Ireland. Market income changes nonetheless pushed up inequality and relative poverty in France. Relative poverty increased in Germany due to policy responses combined with market income changes. Subsequent policy reforms, in the later stage of the crisis, had markedly di¤erent cross-country e¤ects, decreasing overall poverty in France, increasing it in Ireland and giving mixed e¤ects for di¤erent sub-groups in Germany and the UK.