The “Forgotten” Income Component? The inequality effect of including the value of public services in the income concept

Distributional analyses mainly focus on inequality of cash incomes. However, it can be argued that also the benefits households derive from publicly provided services should be taken into account. In this article we focus on the distribution effects of the two major categories of publicly provided services in Belgium, namely education and health care services. We discuss conceptual and methodological issues related to including the value of public services in the income concept. Using data from EU-SILC, we find that including in-kind benefits for education and health care in the income concept leads to a considerable decline in income inequality in Belgium. JEL codes: D31, I14, I24, I38