**Figure 13. Lorenz curves for basic income concepts**

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1.0 market income (PGT)<br>market income (PDI)<br>0.9<br>final income<br>consumable income<br>0.8<br>disposable income<br>0.7<br>0.6<br>0.5<br>0.4<br>0.3<br>0.2<br>0.1<br>0.0<br>0.0 0.2 0.4 0.6 0.8 1.0<br><!-- End of picture text -->

_Source_ : own estimates based on CEQ methodology.

According to the national poverty line, 20.2% of the population would be poor if there were only market income without any fiscal interventions including the pension system<sup>21</sup> . In the case when pensions are treated as deferred income, the level of poverty is much lower (5.9%), stressing the significant role of the pension system in poverty reduction. On the one hand, it stems from the size of pensions that exceed the national poverty line. On the other hand, it stresses that pensions are a sole or dominant income for many households in Belarus. Fiscal redistribution related to other direct transfers and taxes offsets the risk of poverty down to 3.4%<sup>22</sup> . Moreover, the poverty gap, based on the disposable income concept, is also rather low, highlighting the absence of extreme poverty within the disposable income concept. On the contrary, the system of indirect taxes and subsidies increases the risk of poverty up to 5.2%, not affecting much its depth (the poverty gap remains low).

**Table 7. Main poverty and inequality indicators by income concepts**

|||**Market**<br>**PGT**|**Income**<br>**PDI**|**Disposable**<br>**Income**|**Consumable**<br>**Income**|**Final**<br>**Income**|
|---|---|---|---|---|---|---|
|Gini||0.407|0.292|0.267|0.270|0.227|
|Theil Index||0.259|0.151|0.129|0.131|0.094|
|90/10||14.82|3.70|3.25|3.32|2.61|
|USD 2.5 PPP|Headcount Index|8.3|0.2|0.0|0.0|0.0|
||PovertyGap|5.9|0.1|0.0|0.0|0.0|
|USD 5 PPP|Headcount Index|11.6|0.7|0.0|0.1|0.0|
||PovertyGap|8.0|0.2|0.0|0.0|0.0|
|USD 10 PPP|Headcount Index|19.0|5.0|2.5|3.9|0.7|
||PovertyGap|11.6|1.3|0.4|0.7|0.1|
|National poverty line (USD|Headcount Index|20.2|5.9|3.4|5.2|0.8|
|10.62 PPP)|PovertyGap|12.1|1.6|0.5|0.9|0.1|
|National moderate poverty|Headcount Index|32.7|21.6|19.8|24.8|7.5|
|line(USD 16.69 PPP)|PovertyGap|17.2|5.7|4.2|5.6|1.3|

_Note_ . Minimum consumer budget represents national moderate poverty line. _Source_ : own estimates based on CEQ methodology.

The scale of redistribution caused by fiscal interventions is higher than the change in inequality indicators may suggest. The decomposition of the change in the Gini indicator reveals that vertical equity generated by fiscal policy is accompanied by significant horizontal effects (see Table 8). In particular, the reduction in Gini related to the influence of direct taxes and transfers, including pensions, would be 0.20 pp if there were no re-ranking effects between market (PGT) and disposable income. However, changes in the relative welfare of the population across these income concepts is natural as it is attributed to the pension system, which stands for a major part of direct

> 21 Application of national absolute poverty line to other income concepts than disposable income is for illustration purposes only, as it is constructed based on actual retail, i.e. post-fisc prices.

> 22 Poverty estimates based on disposable income and national poverty line should correspond to the official share of low-income people in Belarus. In practice there is significant difference, as official estimates are done based on quarterly data.

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