BE-PARADIS Working Papers

In this study, a method is proposed to measure well-being inequality and to test for well-being convergence in the EU. The method considers well-being as a multidimensional concept and recognizes that individuals may have different preferences about the relative importance of the different dimensions of well-being. The focus is on interpersonal well-being convergence (i.e., a reduction in well-being inequality between all European citizens) and on intercountry well-being convergence (i.e., a reduction in the well-being inequality between the European countries). To illustrate the method, we use data from EU-SILC (2005-2019) about five dimensions of well-being: income, employment, crime, pollution and health. The relative importance of these dimensions is estimated with a life satisfaction regression. Results show interpersonal and intercountry well-being convergence over the study period, but increased well-being inequality during the Great Recession (2008-2015). Several decompositions are used to shed light on the drivers of well-being convergence in Europe.

BE-PARADIS WP23.6 - Distributional National Accounts for Belgium

Bart Capéau, André Decoster, Nabil Sheikh Hassan, Jonas Vanderkelen

Belgium often stands out as an exceptional case in comparative studies on both the level and the evolution of inequality. Contrary to the rise in income inequality in many OECD countries, publicly available sources mostly report a rather stable and low level of income inequality in Belgium between the mid 1980’s and mid 2010’s. In this paper, we reconsider the evolution of income inequality in Belgium between 1995 and 2019 by applying the methodology of Distributional National Accounts (DINA) as documented in (Alvaredo, 2021). We construct DINA by inserting the distributional information from the two main survey datasets (ECHP and SILC) into the income information contained in the National Accounts. This allows to identify the role of important missing or incompletely reported income components as an explanatory factor for the perceived stability of inequality. Our preliminary results highlight the importance of calibrating the distributional information contained in the survey data to the National Accounts aggregates. Especially after the financial crisis we find that the DINA-approach unveils a previously undetected rise in Belgian income inequality. Remarkably, the timing of the turning point in the evolution of inequality depends on the income concept. For pre-tax income we find a rise in inequality since 2010. For post-tax and transfer disposable income, the increase only starts in 2014.  

BE-PARADIS WP23.5 - Poor and wealthy hand-to-mouth household in Belgium

Laurens Cherchye, Thomas Demuynck, Bram De Rock, Mariia Kovaleva, Geoffrey Minne, Maite De Sola Perea, Frederic Vermeulen

We identify the population shares of poor hand-to-mouth households, wealthy hand-to-mouth households and non hand-to-mouth households in Belgium. We apply the methodology proposed by Kaplan and Violante (2014) and Kaplan, Violante and Weidner (2014) to the Belgian component of the Household Finance and Consumption Survey. We find that the fraction of hand-to-mouth households in Belgium is substantial and predominantly consists of wealthy hand-to-mouth households. We also compare the observable characteristics and marginal propensities to consume (MPCs) of the three household types We find that Belgian wealthy hand-to-mouth households have characteristics that resemble those of the non hand-to-mouth households, while their MPCs are often more similar to those of the poor hand-to-mouth households. This pleads for giving a unique place to each type of households when evaluating the effects of fiscal policy.

The paper proposes a framework of assess fairness in multidimensional distributions while respecting individuial preferences. We characterize a simple measure - Equivalent Advantage - that captures the distance from the current outcome to the potentially individual specific norm outcome. We introduce a non parametric approach to partially identify our measure via set identification of individual indifference curves. Our methodology is illustrated by analyzing multidimensional fairness in Belgium using the MEqIn database. Despite the set identification, we show that our analysis of the Equivalent Advantage distribution allows for interesting insights on multidimensional inequality, poverty and opportunity distribution.

We make use of rich micro data from the Belgian MEqIn survey, which contains detailed information on individual consumption, public consumption inside households and time use. We explain the observed household behavior by means of a collective model that integrates marriage market restrictions on intrahousehold allocation patterns. We adopt a revealed preference approach that abstains from any functional form assumptions on individual utility functions or intrahousehold decision processes. This allows us to (set) identify the sharing rule, which governs the intrahousehold sharing of time and money, and to quantify economies of scale within households. We use these results to conduct a robust and meaningful individual welfare and inequality analysis, hereby highlighting the important role of detailed consumption and time use data. 

BE-PARADIS WP23.2 - Stable marriage, household consumption and unobserved match quality

Martin Browning, Laurens Cherchye, Thomas Demuynck, Bram De Rock, Frederic Vermeulen

We present a methodology for the structural empirical analysis of household consumption and time use behaviour under marital stability. Our approach is of the revealed preference type and non-parametric, meaning that it does not require a prior functional specification of individual utilities. Without making use of the transferable utility assumption, but still allowing for monetary transfers, our method can identify individuals' unobserved match qualities and quantify them in money metric terms. We can include both preference factors, affecting individuals' preferences over private and public goods, and match quality factors, driving differences in unobserved match quality. We demonstrate the practical usefulness of our methodology through an application to the Belgian MEqIn data. Our results reveal intuitive patterns of unobserved match quality that allow us to rationalise both the observed matches and the within-household allocations of time and money. 

This study looks at the time allocations of individuals with a focus on paid and unpaid work, its division within the households, as well as its link with life satisfaction. The analysis is performed for Belgium in 2016 using the MEqIn database, a database containing information on both partners in the household. Time use by men and women appears to be quite different. Men are found to be more active in the paid activities and women in the unpaid ones. The link between time use and life satisfaction appears to be different for each gender as well. As in previous studies, women are found to be happier when working part-time. However, the usual conclusion that they follow traditional gender norm is challenged as it appears that this result remains only when they also undertake the majority of the unpaid work. This supports the idea that women active on the paid labor market suffer from a double burden. We then look at the within household interdependencies in the time allocations and at the link these can have with the subjective well-being of both men and women. Doing so, it appears that men’s behavior can be related to the gender-identity hypothesis, and more precisely to its bread-winner version, while women’s behavior is closer to a egalitarian vision of the division of work. We further observe that those behaviors are softened by the presence of children.

The energy price crisis has once again highlighted the importance of the adjustment of income to the increased cost-of-living. In Belgium, this happens through a regulation that guarantees regular indexation of wages and benefits. In other European countries, the adjustment is a result of collective wage bargaining and (discretionary) government decisions on benefit amounts. Such an indexation cannot be ideal, in that it cannot cover exactly the increased costs for all households, and it causes important heterogeneity and distributional variation in the net impact of the energy price crisis. Moreover, the indexation mechanism is sensitive to government decisions which affect prices. The energy crisis induced many European governments to introduce such price compensations. This paper analyses the interaction effects between indexation and the compensation. Although our analysis focuses on Belgium, the interaction is present in any setting where wage indexation is based on a price index affected by government compensatory measures. Even after taking into account this interaction with the indexation, the measures introduced in Belgium turn out to be largely positive for low income households, but they become negative for a large majority of higher income households. On average the impact of the compensation, including the dampening effect on indexation, is negative for households. The interaction effect of the price compensation measures with automatic indexation also involves an indirect support to firms which will pay lower wages, compared to a situation without government measures.

BE-PARADIS WP22.3 - We are all facing the same storm, but not all are in the same boat

Bart Capéau, André Decoster, Duygu Güner, Nabil Sheikh Hassan, Jonas Vanderkelen, Toon Vanheukelom, Stijn Van Houtven


We use detailed information on all real estate stock and transactions since 2006 to study housing inequality in Belgium and how a recent policy shaped it. We use the transactions to predict the market value of all dwellings in the country, to then estimate inequality in value or space at different levels of aggregation – from the federal to the local neighborhood level. Overall inequality is relatively low (Gini of 0.25), but significant heterogeneity exists across and within municipalities. Using a differences-in-differences framework, we study how Flanders’s recent 3% reduction in registration fees affected house prices and inequality. We estimate that the policy increased prices by 3% on average and reduced inequality in Flanders by 0.8% by compressing the price distribution from below. We argue that the primary winners of the policy are low-value homeowners, who see their estate’s valuation increase. The main losers are low-value renters, who might see rent increases in the short term. Both parts of the paper reveal significant geographic heterogeneities, thus highlighting the importance of granularity in the data for studying inequality.

In this paper, we review the existing evidence about the evolution of income inequality in Belgium between 1985 and 2020. We include information from academic studies and publicly available databases that contain statistics on the evolution of market (or factor) income, gross or pre-tax income, taxable income or disposable income. This evidence relies on data from surveys, administrative tax register data or national accounts. Most sources document that income inequality in Belgium is rather stable over the period considered. Yet, an overall definitive conclusion about the evolution of inequality for different income concepts is hard to distil from the different sources, given missing information, inconsistent definitions over time and structural breaks between the underlying datasets.

BE-PARADIS Technical Reports

BE-PARADIS Technical Report 1 - Imputation of expenditures from HBS to SILC

Bart Capéau, André Decoster, Jonas Vanderkelen, Stijn Van Houtven, Quinten Vanrespaille

This report documents the imputation of expenditures data from the Household Budget Survey (HBS) to the Survey of Income and Living Conditions (SILC) using the Predictive Mean Matching imputation method. We use two tools to test the quality of the imputation method. First, we test the imputation methodology by imputing one half of HBS to another. Second, we compare the distribution of the observed expenditures from HBS and the imputed expenditures in the joint SILC-HBS dataset. The observed differences in the distributions of the expenditures in HBS and SILC with imputed expenditures can be attributed to differences in the common variables that we use to match households from HBS to households from SILC.