Cash Transfers and Guaranteed Minimum Income Programs:
Research, Evaluation, and Policy
Prague, Czech Republic
September 9-10, 2024
-
“Distributional Impact Assessment of Recent Changes to Pensions, Cash Transfers and Taxes in Lithuania”
Jekaterina Navicke, Vilnius University
Assessing the distributional impact of policy reforms is a crucial component of the policy planning and implementation cycle. This paper presents the methodology for Distributional Impact Assessment (DIA) adopted by the Ministry of Social Affairs and Labour and the Ministry of Finance in Lithuania. We examine the impact of recent changes to cash transfers and direct taxes following the Covid-19 pandemic, focusing on key distributional indicators such as the at-risk-of-poverty rate (AROP), income inequality (measured by the inter-quintile ratio and the Gini coefficient), and a nationally applied measure of absolute poverty. The analysis utilizes the tax-benefit microsimulation model EUROMOD. Results indicate a consistent decline in AROP and income inequality in Lithuania between 2021 and 2024, primarily due to adjustments in pensions and other cash social transfers, rather than tax changes. However, these adjustments only partially mitigate the effects of high inflation. As a result, the absolute poverty rate is estimated to exceed its 2021 levels by 2-4 percentage points between 2022 and 2024.