Counterfactual analysis: Comparing voucher systems with taxes, subsidies, and public spending to reduce income...

This study examines how voucher systems compare to traditional redistributive policies-such as progressive taxation, subsidies, and public spending-in reducing income inequality.

We apply a counterfactual analysis approach, using panel data from twelve countries over 22 years. By employing econometric modelling, we simulate a series of "what-if" scenarios to assess the impact of each policy on the Gini coefficient, a key measure of income inequality.

The results suggest that voucher systems can be particularly effective at targeting essential services, like education and healthcare, improving access for lower-income groups, and helping to reduce inequality. Public spending on education and healthcare proves to be incredibly potent in narrowing income disparities. These sectors are vital for addressing systemic inequalities, improving overall access and providing long-term benefits to disadvantaged groups. In contrast, progressive taxation and subsidies show mixed effectiveness. While higher tax revenues often correlate with reduced inequality, their impacts vary across countries and contexts. The effectiveness of progressive taxation depends on factors such as the efficiency of tax systems and the political environment, which can influence how well these policies work. Similarly, subsidies generally produce only modest or inconsistent reductions in income gaps, suggesting that while they provide temporary relief, they do not always address the root causes of inequality.

These findings suggest that well-designed voucher programs, when combined with progressive taxation and strategic public spending, can play a key role in enhancing redistribution efforts. By improving access to essential services and targeting lower-income groups, vouchers have the potential to reduce income inequality. However, achieving equitable economic outcomes requires careful policy design and attention to the broader economic context.