Assessment of redistribution policies in Singapore

• Main Authors: Ang, Xin Rui, Cham, Zhi An, Peh, Earl Hao Kien
• Other Authors: Akshar Saxena
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2021
• Subjects: Social sciences::Economic theory
• Online Access: https://hdl.handle.net/10356/152959
• Institution: Nanyang Technological University

Singapore is recognised as one of the richest countries in the world. However, income inequality has continued to exacerbate in recent years, with the country ranking 107 out of 158 countries based on the Commitment to Reducing Inequality Index (Inequality Index, 2020). A study conducted by the National University of Singapore’s Social Service Research Centre found that an estimated 12% of Singapore households are not earning enough to meet their basic needs, further highlighting the trend of increasing income inequality (Ng et al., 2018). Our group conducted policy simulations on Singapore households by using household income, expenditure for Goods and Services Tax vouchers (GSTV) and ComCare payouts data from 2019. Specifically, our study makes adjustments to policy expenditure and recipient profiles based on income and annual value (AV) of homes to address the research questions: What is the impact of an increase in consumption tax on inequality such as the recently announced increase in Goods and Services Taxes (GST) from 7% to 9%? Would altering ComCare’s generosity affect redistribution through change in inequality? What is the impact of cash-transfers (GST Vouchers (GSTV) and ComCare) on inequality? To ascertain which eligibility condition (income or annual value (AV) of home) is a better determinant for redistributive policies? These are answered through our study that conducts a microsimulation analysis to analyse the equality outcomes through the Gini coefficient and Atkinson index. Taken together, our study finds that the GST hike to 9% will widen the income gap. GSTV and ComCare payouts can more than offset the increased inequality, with the latter policy being more effective. Compared to the increased GSTV payouts, the modified ComCare yields greater equality outcomes due to its targeted nature and higher distributed amounts. Finally, GSTV payouts based on income only is a better determinant for redistribution, but when combined with housing types can selectively allocate redistributive resources to the needy more accurately to achieve equality outcomes. In totality, our findings highlight the differences in equality outcomes based on varying emphasis on redistribution policies with insights on further studies and implementation direction in Singapore’s context. Keywords: income inequality, redistribution, poverty reduction, Gini coefficient, Atkinson index