adults with disabilities, complementary personal budget and monthly allowance for covering attendant expenses.

- _Educational grants_ are given to children enrolled in education belonging to poor families. There are several types of grants, such as social grants (pre-university and university education), tuition grants (pre-university), scholarships for further learning (pre-university), educational allowance – “Money for high-school” (upper secondary) etc. and their entitlement involves an income test.

Social spending on in-kind transfers in the form of education and health amounted to 6.8 percent of GDP in 2016. The education system is mostly public in Romania (private expenditure on education is small at all levels of education). The Romanian government provides free public education from pre-school and up to tertiary education. There are no direct user fees except for pre-school, though indirect fees in the form of school supplies and uniforms. Compulsory education starts with primary school (at the age of 6 years) and ends with the 10<sup>th</sup> grade (first level of upper secondary, at the age of 16-17 years).

In terms of health spending, a “minimal” set of free medical services is provided for all its citizens and financed directly from the budget. This minimal package is restricted to emergency cases or potential epidemic diseases, pregnancy, family planning, and prevention. In addition, citizens who contribute and participate in the public health insurance system, receive an extended “basic” set of services, including preventive and curative medical services, health care services, medicines, sanitary materials, medical devices and others. Benefits begin on the first day of illness or accident until complete cure. Dependents who are otherwise not insured can also benefit from these “basic” services, including children up to age 18, students up to age 26 without earnings, spouse or parents without insurance, and persons with disabilities without earnings. The public health insurance system is funded through health insurance contributions, which are mandatory on employment, self-employment and investment income. Before 2017, contributions were also mandatory on pension income above a threshold, as well as on investment income irrespective of its amount and the presence of other sources of income. User fees are charged for health care services, medicines and medical devices which are beyond the scope of “basic” package.

# **III. Data sources, methods, and assumptions**

## **Data Sources and Approach**

The 2016 HBS contains both income and expenditure data, along with demographic and household characteristics, thus enabling the identification of indirect taxes across the distribution. Household survey data are combined with data from National Income Accounts and public finance accounts from the Ministry of Finance. This included information on consolidated central government budgets, local government budgets, and annual reports from the National Statistics Institute on various sectors.

## **Approach**

To analyze the incidence of each fiscal intervention, and the impact of taxes and social spending on poverty and inequality, we follow the Commitment to Equity (CEQ) approach of Lustig (2018) and measure per 9