The distributional impact of in-kind public benefits in European countries

International comparisons of inequality based on measures of disposable income may not be valid if the size and incidence of publicly provided in-kind benefits differ across the countries considered. The benefits that are financed by taxation in one country may need to be purchased out of disposable income in another. We estimate the size and incidence of in-kind or "noncash" benefits from public housing subsidies, education, and health care for five European countries using comparable methods and data. Inequality in the augmented income measure is dramatically lower than in disposable income, with the effects of the three components varying in importance across countries. Adapting equivalence scales to take proper account of differences in needs for health care and education across population members reduces the scale of the effect, but does not eliminate it. © 2010 by the Association for Public Policy Analysis and Management