We use the microsimulation model EUROMOD based on EU-SILC data for the EU-28 countries to compute the Gini coefficients for market income, market income plus pensions, and disposable income in order to measure redistribution. Next, we use counterfactual decomposition techniques to assess the change in redistribution and to isolate the effects of policy changes. In addition to vertical redistribution, we pay special attention to horizontal redistribution between socioeconomic groups. We find that the majority of EU member states have experienced an increase in overall redistribution between 2007 and 2014, with the exception of some Eastern European countries that effectively flattened their income tax schedule. The drivers of these changes differ across countries: in certain cases, increased redistribution results from changes in market incomes, in other cases from tax-benefit changes, sometimes linked to tax-based budget consolidation, in particular in Southern Europe.

When assessing the incidence of taxes over time, our results show that in Southern and Western Europe both automatic stabilization effects and active changes in the tax system have worked in the same direction and alleviated the burden on younger generations, who have been hit especially hard following the financial crisis, while in Eastern Europe, discretionary policy changes had the potential to increase intergenerational tensions.

No clear pattern emerges when analyzing across occupations and job types. Some countries, such as Germany, have actively compensated for job polarization while other countries, such as Poland, have predominately favored individuals in non-routine cognitive occupations benefitting from job polarization. In most other countries, policy makers have yet to act upon increasing job polarization and tax incidence is mainly driven by changing market incomes.

We also assess developments when differentiating by benefit-recipient status. Most countries have implemented progressive policy changes that lead to increasing transfers to households depending on transfers. Policies vary much more once households with income earners are considered. In particular in Eastern Europe, increasing efficiency has dominated the redistributive motive and many countries have actively lowered the tax burden on single and dual earner households, i.e. the households with traditionally large tax burdens. In contrast, tax burden increases are most often driven by budget consolidation considerations and mainly observed in countries affected by the financial crisis, such as Greece and Portugal.

Our analysis relates to the literature in the following ways. Kanbur (2018) presents a theoretical treatment of how progressivity in the vertical redistribution, i.e. across income groups, can be negatively affected if this redistribution also implies transfers among socio-politically relevant (horizontal) groups. Paulus and Tasseva (2017) analyze how changes in tax-benefit policies and market incomes have influenced income distributions in Europe. Our paper additionally focuses on population subgroups, job types, and intergenerational analysis. Dolls, Doorley, Paulus, Schneider and Sommer (2018) look at distributional changes from demographic change (upskilling, population aging), relying on demographic projections for analysis. We focus on the current demographic structure but analyze how age groups have been affected differently. Other papers that study inequality and redistributive policies after the financial crises focus on a subset of countries or income years (Navicke 2017, Callan, Doorley, Savage 2018, Bargain, Callan, Doorley, Keane 2017) or focus on specific measures of austerity (Figari, Paulus, Sutherland 2017).

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