Introduction

How did the economic situation of children develop across 17 Organisation for Economic and Co-operation and Development (OECD) countries over the last decade? This chapter:

• • reviews changes in average incomes, the distribution of incomes and poverty of children;

• • suggests possible factors underlying these changes;

• • analyses the response of the tax/transfer system to changes in market income across countries and over time.

After a short description of the data, the first substantive part of the chapter explores whether the economic situation of children has deteriorated overall. Changes to the overall income distribution of children are then analysed using various distribution indices. This is complemented by an analysis of poverty indicators to assess developments towards the bottom of the distribution. In each case, the possible effect of changing population structures of different household types is examined. The second part of the chapter analyses the impact of income taxes and public transfers on low incomes among children. The chapter concludes with implications of the results for policy.

Sources and data

Data

This study uses a common approach to analyse national data on the distribution of household income in selected years. Data were collected on the basis of a questionnaire completed by national authorities or experts from 17 OECD member countries who drew on the country survey or tax files most appropriate for comparisons over time. The analysis is limited to the decade between the mid-1980s and mid-1990s.

There is somewhat less cross-country comparability in these data than with the Luxembourg Income Study (LIS) data, although a number of problems, described in Burniaux et al, 1998 and Oxley et al, 1999, are common to both. Such problems are almost certainly less significant for comparisons over time. Even so;

• • Available years were not always at the same cyclical position and results can be sensitive to the end points chosen.

• • These samples may not always accurately reflect changes over time at the extremes of the distribution in some countries.

• • Under-reporting or other measurement problems may not remain constant over time.

This highlights the need for caution in interpreting these results.