Compensation for Households with Children in Croatia, Slovenia and Austria

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We assess the level and distribution of compensation for households with children provided by child support policies in Croatia, Slovenia and Austria. The child support policies in which we are interested include child and large family benefits, subsistence and housing benefits, and tax relief for dependent children. Using a microsimulation technique of “policy importing”, we show that the adequacy and evenness of the Croatian child support could be substantially improved if Croatia’s current policies were replaced by their Slovenian and Austrian equivalents. We propose improved versions of Verbist and Van Lancker’s (Soc Indic Res 128(3):1299–1318, 2016) indicator of horizontal equity in the sense of construction, aggregation to the population level and interpretation.

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  1. 1.

    For studies measuring the impact on child poverty see, e.g., Bradshaw (2012), Bradshaw and Huby (2014), Immervoll et al. (2000), Sutherland and Piachaud (2001). Influence on fertility has been researched by, e.g., Bonoli (2008), Gauthier and Philipov (2008) and Werding (2014). Gornick et al. (1997), McDonald (2006) and Ray et al. (2010) study the effects of child support on work decisions and gender equity.

  2. 2.

    Examples include new-borns, pre-school children, and children with a disability. However, child support policies may be constructed to provide supplemental amounts, e.g., for children with a health impairment or children of single parents; these supplements are captured by our basic package.

  3. 3.

    Henceforth, we use the simple term “child benefits” to designate all child and large family benefits paid in cash, whether means-tested or non-means-tested.

  4. 4.

    These countries have a shared history, and in modern times they maintain tight economic relationships.

  5. 5.

    In addition to the classical works of Engel (1895) and Rothbarth (1943), more recent studies include, e.g., Bradbury (2008), Bargain et al. (2010) and Oldfield and Bradshaw (2011).

  6. 6.

    In the widely accepted Kakwani (1984) model, the “inequality effect” of the fiscal system, i.e., the difference between pre-fiscal and post-fiscal income inequality, is decomposed into the “vertical” and the “horizontal” effect. The former encompasses the potential inequality effect, i.e., that which would be achieved in the absence of horizontal inequity. The latter signifies violations of the “no-reranking principle” of horizontal equity. Subsequently, models were developed that enable separate treatments of reranking and classical horizontal inequity; see Aronson et al. (1994) and Duclos et al. (2003). Dardanoni and Lambert (2001) state that reranking and classical horizontal inequity are not separately existing phenomena but two different manifestations of horizontal inequity. Correspondingly, Urban (Urban 2014a, b) suggests that Kakwani’s (1984) horizontal effect—although it treats reranking only—captures the whole horizontal inequity induced by the fiscal system. Despite its “upgraded” versions, Kakwani’s (1984) model remains the most popular in empirical investigations (e.g., Avram et al. 2014; Verbist and Figari 2014).

  7. 7.

    Imagine, instead, that one uses \(X_{i}\) for pre-fiscal distribution and \(\bar{Y}_{i}\) for the post-fiscal distribution. Additionally, assume that \(X_{i} = Y_{i}\) for all i, i.e., that there are no taxes and benefits. According to this option, for all households with \(\varepsilon_{i} > 1\) we would observe that \(\bar{Y}_{i} < X_{i}\), namely, that they are taxed by a fictive tax.

  8. 8.

    Verbist and Van Lancker (2016) mention a similar example: “If an individual A with 2 children and an individual B without children have the same pre-tax income, they cannot be seen as being ‘equals’ in terms of utility level because children incur substantial private costs.”

  9. 9.

    A similar example is mentioned by Verbist and Van Lancker (2016): “Nonparents thus derive more utility from an equal disposable income compared to parents, e.g. they can buy more goods or leisure time.”

  10. 10.

    Such two households are, e.g., hypothetical households 1 and 3 from Table 1.

  11. 11.

    The derivation is shown in “Appendix A”.

  12. 12.

    However, as our reviewer notes, the possible shortcoming of this approach is that it does not take into account the fact that households may decide its spending on children (i.e., costs of children) with post-fiscal income in mind, without making a distinction between the sources (i.e., child support versus other income). This requires further investigation, which goes beyond the scope of this paper.

  13. 13.

    Figure 7 in “Appendix D.1” shows the patterns of ethical weights for several values of \(\rho\).

  14. 14.

    EU-SILC NDB 2016 is the national database collected by the Croatian Bureau of Statistics through the Croatian Income and Living Conditions Survey (Anketa o dohotku stanovništva, ADS). It serves as a basis for the building of EU-SILC UDB 2016.

  15. 15.

    For more details about the Croatian child benefit, see “Appendix C”.

  16. 16.

    One of the reasons is that the definition of the dependent child used for the Croatian child PIT allowance differs from the definition used in this research. Namely, the PIT definition also captures children above the age of 17 if they are students.

  17. 17.

    This is attributed to families with newborn children. Because a mother receives maternity and parental benefits, her income is above the threshold that qualifies her as the dependent spouse. In a counterfactual scenario without children, the mother’s income falls below the mentioned threshold, and the father obtains the allowance for the dependent spouse; consequently, \(SIT_{i} = IT_{i}^{ds3} - IT_{i}^{ds2} < 0\) (see “Appendix B” for definitions of these terms).

  18. 18.

    An additional dataset/system must be created for countries that tax social benefits (see Figari et al. 2011). We skip this step because social benefits are tax-free in all the countries under consideration.

  19. 19.

    Corak et al. (2005) and Figari et al. (2011) call terms such as \(SCB_{i}\) and \(SSB_{i}\) “child-contingent benefits” and terms like \(SIT_{i}\) “child-contingent tax reductions”.

  20. 20.

    Notice that \(IT_{i}^{ds1} - IT_{i}^{ds2} \ge 0\) represents the PIT paid by income-earning children; using \(IT_{i}^{ds1}\) instead of \(IT_{i}^{ds2}\) in the calculation of \(SIT_{i}\) would underappreciate the CHC from PIT relief.

  21. 21.

    BB is a lump-sum amount, administratively determined at HRK 3326 (EUR 443.5) per month.

  22. 22.

    EUROMOD input data for the desired hypothetical households are created separately for each country using the Hypothetical Data Tool that was available in older versions of the EUROMOD software.

  23. 23.

    For example, in household #22, Adult 1 and Adult 2 both work 40 h per week; each of them earns a gross wage of 55% of AGW.

  24. 24.

    Croatia has more than 90% homeowners. Therefore, because Croatia is in the focus of this research, a typical household should also be a homeowner. However, in that case we would probably underappreciate the importance of housing benefits in Slovenia and Austria.


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This work has been fully supported by the Croatian Science Foundation under the project number UIP-2014-09-4096 (“Application of Microsimulation Models in the Analysis of Taxes and Social Benefits in Croatia”, AMMATSBC). The work of doctoral student Martina Pezer has been fully supported by the Croatian Science Foundation. The authors wish to thank two anonymous referees for their valuable suggestions and discussions, which significantly improved the quality of this paper. The authors also thank Holly Sutherland for her constructive comments on an earlier version of this paper. Any remaining errors are the authors’. Some of the results presented in this paper are based on EUROMOD version H0.34. EUROMOD is maintained, developed and managed by the Institute for Social and Economic Research (ISER) at the University of Essex, in collaboration with national teams from the EU member states. The authors are indebted to the many people who have contributed to the development of EUROMOD. The process of extending and updating EUROMOD is financially supported by the European Union Programme for Employment and Social Innovation (Easi; 2014-2020). The results and their interpretation are the authors’ responsibility. EUROMOD utilises microdata from the EU Statistics on Incomes and Living Conditions (EU-SILC) made available by Eurostat (59/2013-EU-SILC-LFS).

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Correspondence to Ivica Urban.

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A. Derivation of Eq. (4)

Because \(\Psi_{s} = \Psi_{t}\) and \(a_{s} = a_{t}\), we rewrite Eq. (3) as follows:

$$\frac{{\Psi_{s} + C_{s}^{R} }}{{1 + 0.5 \cdot (a_{s} - 1 + e_{s} ) + 0.3 \cdot d_{s} }} = \frac{{\Psi_{s} }}{{1 + 0.5 \cdot (a_{s} - 1)}}$$

The following simple manipulations lead us to the final result:

$$\begin{aligned}&{(\Psi_{s} + C_{s}^{R} )\left[ {1 + 0.5 \cdot (a_{s} - 1)} \right]= \Psi_{s} \left[ {1 + 0.5 \cdot (a_{s} - 1 + e_{s} ) + 0.3 \cdot d_{s} } \right],} \hfill \\ &{\Psi_{s} \left[ {1 + 0.5 \cdot (a_{s}- 1)} \right] + C_{s}^{R} \left[ {1 + 0.5 \cdot (a_{s} - 1)} \right]= \Psi_{s} \left[ {1 + 0.5 \cdot (a_{s} - 1 + e_{s} ) + 0.3 \cdot d_{s} } \right],} \hfill \\ &{C_{s}^{R} = \frac{{\Psi_{s} \left[ {1 + 0.5 \cdot (a_{s} - 1 + e_{s} ) + 0.3 \cdot d_{s} } \right] - \Psi_{s} \left[ {1 + 0.5 \cdot (a_{s} - 1)} \right]}}{{1 + 0.5 \cdot (a_{s} - 1)}},} \hfill \\ &{C_{s}^{R} = \Psi_{s} \cdot \frac{{0.5 \cdot e_{s} + 0.3 \cdot d_{s} }}{{1 + 0.5 \cdot (a_{s} - 1)}}.} \hfill \\ \end{aligned}$$

B. Calculation of Child Support

In this section, we give a more detailed and formalised explanation on how the amount of child support is obtained for hypothetical and real sample data.

Denote with \(X_{i}\) the pre-fiscal income of household i in the actual scenario. Let \(IT_{i}\), \(CB_{i}\), \(SB_{i}\), \(OT_{i}\) and \(OB_{i}\) be the amounts of PIT, child benefits, subsistence and housing benefits, all other taxes and all other benefits, respectively. Post-fiscal or disposable income equals pre-fiscal income minus all taxes plus all benefits, as follows:

$$Y_{i} = X_{i} - (IT_{i} + OT_{i} ) + (CB_{i} + SB_{i} + OB_{i} ).$$

We now conceive the counterfactual scenario, which responds to the following question: What would be the amounts of pre-fiscal income, taxes and benefits of household i in a hypothetical situation in which children were completely ignored (i.e., as if they did not exist)? Pre-fiscal income in the counterfactual scenario is denoted by \(X_{i}^{*}\); \(IT_{i}^{*}\), \(CB_{i}^{*}\), \(SB_{i}^{*}\), \(OT_{i}^{*}\) and \(OB_{i}^{*}\) are denoted analogously.

Specifically, the term \(X_{i}^{*}\) captures the incomes of adult household members, excluding the income of children; the difference of \(X_{i} - X_{i}^{*}\) is positive if children of household i earn some pre-fiscal income. The term \(IT_{i}^{*}\) shows the amount of PIT paid by the adult members of household i in the absence of dependent children. Typically, \(IT_{i}^{*} > IT_{i}\) because in a counterfactual scenario, adults cannot obtain tax relief. Furthermore, it will usually be that \(SB_{i}^{*} < SB_{i}\) because the amount of subsistence and housing benefits increases with the number of household members. Because childless households do not receive child benefits, we have that \(CB_{i}^{*} = 0\), and consequently, for a household with children, \(CB_{i}^{*} < CB_{i}\).

Assume for the moment that children in household i do not contribute to pre-fiscal income; therefore, \(X_{i}^{*} = X_{i}\). Additionally, assume that social benefits are not taxed. For household i, the basic child support components are defined as follows:

$$\begin{aligned} SIT_{i} = IT_{i}^{*} - IT_{i} , \\ SCB_{i} = CB_{i} - CB_{i}^{*} , \\ SSB_{i} = SB_{i} - SB_{i}^{*} . \\ \end{aligned}$$

\(SIT_{i}\), \(SCB_{i}\) and \(SSB_{i}\) represent child support obtained for household i from PIT relief, child benefits, and subsistence and housing benefits, respectively. Naturally, for households without children, all these components have zero values. For households with children, they are typically positive. The sum of \(S_{i} = SIT_{i} + SCB_{i} + SSB_{i}\) represents the total basic child support of household i.

In the case of hypothetical households, defined in “Appendix C.4”, we have intentionally created households with and without children. For example, household p consists of a couple with three children (A2C3), and its pre-fiscal income is \(X_{p}\). The hypothetical sample also contains household q, which consists of a couple who have no children (A2C0) and a pre-fiscal income of \(X_{q} = X_{p}\). Therefore, for household p, we simply have that \(IT_{p}^{*} = IT_{q}\), \(CB_{p}^{*} = CB_{q}\) and \(SB_{p}^{*} = SB_{q}\).

In the case of real data samples, the procedure is more complex. To obtain the necessary variables, we use the method from Corak et al. (2005) and Figari et al. (2011), which proceeds as follows. Three datasets are created in a step-wise manner; incomes, taxes and benefits are calculated separately for each of them using EUROMOD and miCROmod. The datasets are as follows: (a) Dataset 1—the original data and policy system. (b) Dataset 2—the original incomes of children are all set to zero to exclude the effect of children’s income on taxes. (c) Dataset 3—all children are deleted from the data sample.Footnote 18

Denote with \(IT_{i}^{ds1}\), \(IT_{i}^{ds2}\) and \(IT_{i}^{ds3}\) the amounts of PIT obtained for datasets/systems 1, 2 and 3, respectively. Analogously, \(CB_{i}^{ds1}\), \(CB_{i}^{ds2}\) and \(CB_{i}^{ds3}\) (\(SB_{i}^{ds1}\), \(SB_{i}^{ds2}\) and \(SB_{i}^{ds3}\)) are defined for child benefits (subsistence and housing benefits). Child support from a benefit is obtained as the difference between the amounts obtained for datasets 1 and 3; \(SCB_{i} = CB_{i}^{ds1} - CB_{i}^{ds3}\) and \(SSB_{i} = SB_{i}^{ds1} - SB_{i}^{ds3}\). Child support from tax relief is obtained as the difference between tax obtained for datasets 3 and 2; \(SIT_{i} = IT_{i}^{ds3} - IT_{i}^{ds2}\).Footnote 19,Footnote 20

C. Description of Child Support Systems in 2017

C.1. Croatia

Child support in Croatia comes from the following sources: child benefits, PIT child allowance, and subsistence and housing benefits (Table 6). For analytical purposes, the child benefit (Doplatak za djecu) is broken into child benefit I (the “basic part”) and child benefit II (the “pronatalist supplement”). The former represents the standard cash child benefit, while the latter corresponds to the large family cash benefit. Child benefit I is received by all households with children if the monthly household net income per member (HNIPM) is below 50% of the “budgetary base” (BB).Footnote 21 The monthly benefit amount per child decreases with HNIPM, taking the values of 9%, 7.5% and 6% of BB (EUR 39.9, 33.3 and 26.6), respectively, depending on the income bracket. These amounts are increased by 15% for the children of single parents. Three-child households that are eligible to receive child benefit I also receive child benefit II, equalling EUR 66.7 per month; for households with four or more children, child benefit II equals EUR 133.3.

Table 6 Basic child support policies in Croatia, Slovenia and Austria, 2017.

Low-income persons may obtain the subsistence benefit (Zajamčena minimalna naknada), whose amount is a difference between the “household means of subsistence” (HMS) and the net household income. HMS may be considered a product of a benefit base and the “household equivalence scale factor” (HESF) that depends on household members’ characteristics. The benefit base is a lump-sum amount of EUR 106.7 per month. For example, HESF for a lone parent with two children equals 2.1 (i.e., 1.0 for a parent plus 0.55 for each child; HMS is EUR 224 per month); HESF for a couple with two children is 2.0 (0.6 for each parent plus 0.4 for each child; HMS is EUR 213.3). Child benefit I and child benefit II do not enter the net household income in the calculation of the subsistence benefit. Therefore, all three benefits coexist in their full amounts.

The beneficiaries of the subsistence benefit are eligible to receive two housing benefits: Compensation for housing costs (Naknada za troškove stanovanja) and the firewood grant (Naknada za ogrjev). The former is used to cover the costs of rent, water, electricity and other housing bills, and its maximum amount equals 50% of HMS. The firewood grant amount is typically EUR 126.7. Beneficiaries of the subsistence benefit and households whose member(s) receive personal disability allowance have the right to obtain compensation for electricity costs (Naknada za ugroženog kupca energenata), whose amount equals the monthly cost of electricity, with maximum set at EUR 26.7 for each household.

The monthly amount of the child PIT allowance increases from EUR 233.3 for the first dependent child to EUR 333.3 for the second, EUR 466.7 for the third, etc. The effective support from tax allowance depends on the marginal rate of a taxpayer, and as of 2017, these rates are 24% and 36%. In this progressive tax schedule, in absolute and relative terms, higher-income taxpayers obtain greater support.

C.2. Slovenia

The Slovenian child benefit (Otroški dodatek) is received by families with children if the family net income per member (FNIPM) is below 64% of average net wage (ANW), i.e., EUR 679.4 per month. The benefit amount per child decreases with FNIPM, according to the schedule with seven income brackets. The benefit amount for households in the seventh income bracket depends on school enrolment (elementary or high school). For families in the first (seventh) bracket, the benefit amount for the first child is EUR 114.3 (30.4/43.44) per month. Within each bracket, the amounts are increased by 10–25% for the second child and 20–64% for the third or any subsequent child. These amounts are increased by 30% for single parents (not simulated), and pre-school children out of pre-school education are entitled to a 20% increased benefit (not simulated). A large family allowance (Dodatek za veliko družino) of EUR 395 per year is paid to families with three children and EUR 480 per year to families with four or more children; only families with an FNIPM below 64% of the ANW are eligible.

Thus, some similarities between Slovenian and Croatian child benefits are obvious, but there are also many differences. The same is true for subsistence benefits. Slovenian Denarna socialna pomoč also incorporates the HESF, which is multiplied by the “basic minimum income” (which equals EUR 292.56 in 2017) to obtain the “minimum income” of a household. For example, HESF for a single parent with two children is 2.42 (i.e., 1.0 for a parent, 0.76 for the first child and 0.66 for the second child; minimum income is EUR 708 per month); HESF for a couple with two children is 2.99 (1.00 for the first parent, 0.57 for the second parent, 0.76 for the first child and 0.66 for the second child; minimum income is EUR 874.8). Social benefits enter the household income test, with the exception of the large family allowance and 20% of the basic amount of the child benefit for the first child in the first bracket (EUR 22.9). Subsistence benefit incorporates a work incentive: adults who work obtain higher individual equivalence factor. For example, for the first adult working 60–128 h/month (more than 128 h/month), the factor is 1.28 (1.56) instead of 1.0.

Slovenia provides a means-tested housing benefit to households with income below a certain threshold to cover up to 80% of non-profit rent. The eligibility income threshold is the sum of the minimum income, 30% of net family income and estimated non-profit rent. The family income includes the child benefit and subsistence benefit (the large family allowance is left out), and it should be below the family minimum income. The estimated annual non-profit rent varies based on the dwelling size. The benefit amount is the difference between the calculated income threshold and household income.

Another common element of the Slovenian and Croatian systems is PIT. Slovenia also has a progressive tax schedule with five rates (16%, 27%, 34%, 39%, 50%) and an increasing tax allowance for children (in monthly terms: EUR 203.1, 220.8 and 368.2 for the first, second, and third child, respectively).

C.3. Austria

The leading source of support for the Austrian child support system is the non-means-tested family allowance (Familienbeihilfe). The benefit amount for each child increases with age. A supplement is given to families with more than one child, and this supplement per child increases with the number of children. For example, if there is only one child aged 3–9 years, the benefit is EUR 119.6 per month; if there are two children of this age, the benefit is twice the amount of EUR 119.6, plus the supplement of EUR 6.9, which totals EUR 253 per month. If there are three children aged 3–9 years, the benefit equals three times EUR 119.6 plus the supplement of EUR 17.0 per child; this totals EUR 409.8 per month. However, the last family will obtain an additional supplement of EUR 20.0 for the third child, which is called the multiple children supplement (Mehrkindzuschlag). Each child in compulsory school age (6–15 years) receives a yearly amount of EUR 100.0 in September.

In addition to family allowance (and its supplements), every child obtains the child tax credit (Kinderabsatzbetrag), which amounts to EUR 58.4 per child per month. Although it contains the phrase “tax credit” in its name, this benefit is treated as a non-means-tested cash child benefit. A similar “tax credit” is the maintenance tax credit (Unterhaltsabsetzbetrag), which is intended for children receiving maintenance support (alimony). Families with small children (up to 3 years of age) and low income receive the means-tested child benefit. EUROMOD incorporates the Vienna Family Bonus (Wiener Familienzuschuss), while other Austrian states have similar benefits. The amounts per child vary from EUR 152.6 per month for the lowest bracket to EUR 50.9 for the highest.

A housing allowance (based on Vienna rules) is provided to cover the costs of rent or credit rates as a means-tested benefit. The amount depends on family income and size. In 2017, the upper limits of housing allowance were from EUR 315.6 (for 1–2 persons) up to EUR 369.1 (for 7 + persons).

Within the PIT system, there are several more tax relief measures related to children. The child tax allowance (Kinderfreibetrag) is EUR 440 per month if one parent is tax liable or EUR 300 if two parents are tax liable. The single parent tax credit (Alleinerzieherabsetzbetrag) and the tax credit for single earners (Alleinverdienerabsetzbetrag) are similar instruments that have monthly amounts of EUR 41.2, 55.8 and 74.1 for one, two and three children.

Low-income families are eligible for subsistence benefit. EUROMOD incorporates the minimum income benefit (Bedarfsorientierte Mindestsicherung Wien), whereas other states have similar benefits. The HESF is multiplied by the benefit base, which equals EUR 844.46 per month. For example, HESF for a lone parent with two minor children equals 1.54 (i.e., 1.0 for a parent and 0.27 for each child); HESF for a couple with two minor children is 2.04 (0.75 for each parent and 0.27 for each child). The income coverage test is comprehensive, including all social benefits but excluding family allowance and child tax credits.

C.4. Hypothetical Households

To illustrate the functioning of tax-benefit systems, we also use data on hypothetical households, which are created as follows. The structure of the chosen household types is presented in Table 7. AxCy indicates that a household consists of x adult members and y children. Adult members are children’ parents. Both adults are working and earn income from employment, which is the only source of household income. There are no persons with a disability.

Table 7 Hypothetical household types, age of household members

For each household type, we create 100 hypothetical subtypes, which differ by the number of work hours and the amount of employment income.Footnote 22 Adults in households #1 to #20 work 0, 2, …, 36, 38 h per week, earning a gross wage equal to 50% of the country’s average gross wage (AGW; Table 2). Adults in households #21 to #100 work 40 h per week, earning a gross wage that equals 50%, 55%, 60%, etc., of the country’s AGW. In two-adult households, the adults have the same working hours and gross wage.Footnote 23 When working hours are 0, it is assumed that adults are inactive.

We assume that the households are outright owners of their dwellings, i.e., that they do not pay rent. Additionally, we assume that housing and utility costs are zero. Using the first assumption, we effectively reduce housing benefits to zero in Slovenia and Austria because in these countries, housing benefits are paid to cover rent. With the second assumption, housing benefits in Croatia are also reduced to zero. By these assumptions, we abstract completely from housing benefits in the hypothetical household analysis.Footnote 24 Nevertheless, in the real data analysis, housing benefits are included.

We start by observing the amounts and composition of basic child support for a couple with two children (A2C2; Fig. 4). The Austrian pattern of child support is the simplest because of its universal child benefits. All households with gross wages above 60% of AGW receive the same amount. Below that point, we can observe a pronounced effect of subsistence benefits. A slight bump in the contribution of child support from PIT relief can be observed at the income interval of 40–60% of AGW; for these incomes, the tax credit for a single earner no longer applies, whereas the child tax allowance is still not effective.

Fig. 4

Child support for hypothetical couples with two children. Notes: The y-axis shows the total amount of child support for a household and its components, expressed as a percentage of the median equivalised disposable income (MEDI) (see Table 2). The x-axis shows the sum of both partners’ gross wages as a percentage of the average gross wage (AGW) (see Table 2)

The Croatian system is different in many respects. First, the coverage of households by the subsistence benefits is much thinner, up to only 30% of AGW (compared with 60% for Austria and Slovenia). Second, for other households, i.e., those not covered by the subsistence benefits, the amount of child support is very uneven. At approximately 100% of AGW, the child benefit disappears, but child support from PIT relief is still not high enough to compensate for this decrease in total compensation, which creates a V-shaped crack in the interval from 100 to 160% of AGW. At higher incomes, child support significantly increases as a result of progressive PIT. For top incomes, the compensation by far exceeds the amount obtained by the bottom incomes.

Although the Slovenian policy design is quite different from the Austrian one, the pattern of child support is quite similar in these two countries. An exception can be found on the interval from 240 to 390% due to the disappearance of the child benefit. In comparison to Croatia, the Slovenian system provides much more generous support for households up to 150% of AGW. Although the top PIT rates in Slovenia are very high (up to 50%), we do not observe levels of child support from PIT relief as high as those in Croatia because Slovenian tax allowances for children are lower in terms of AGW.

Figure 5 compares the total child support amounts for couples with one, two and three children.

Fig. 5

Child support per child for hypothetical couples. Notes: The y-axis shows the total amount of child support for a household, divided by the number of children and expressed as a percentage of the median equivalised disposable income (MEDI) (see Table 2). The x-axis shows the sum of both partners’ gross wages, as a percentage of the average gross wage (AGW) (see Table 2). A2C1, A2C2 and A2C3 represent couples with 1, 2 and 3 children, respectively

Finally, we present the child support premium for the third child, calculated as the difference between the total basic child support for A2C3 and the total basic child support for A2C2 (Fig. 6). The premium is highest in Croatia, except on the interval from 150 to 220% AGW, where the familiar bump occurs because of the disappearance of the child benefit.

Fig. 6

Child support premium for the third child. Notes: The y-axis shows the amount of the child support premium for the third child, which is the difference between the total child support for a couple with three children (A2C3) and for a couple with two children (A2C2), obtained at each income level and expressed as a percentage of the median equivalised disposable income (MEDI) (see Table 2). The x-axis represents the sum of both partners’ gross wages, expressed as a percentage of the average gross wage (AGW) (see Table 2)

D. Miscellaneous

D.1. Ethical Weights

See Fig. 7.

Fig. 7

Ethical weights ω(p) from Eq. (8)

D.2. Compensation Indices

See Fig. 8.

Fig. 8

Mean compensation indices for hypothetical scenarios, by decile groups. Notes: Compensation indices are obtained using the data and procedures explained in “Appendix B” and Sect. 2.3. The x-axis denotes the groups of households: “All” represents all households; “1”, “2”, etc. denote decile groups, which are formed according to the equivalised pre-fiscal income of all households in the sample. The y-axis shows the mean value and the standard deviation of the compensation index for a group

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Urban, I., Pezer, M. Compensation for Households with Children in Croatia, Slovenia and Austria. Soc Indic Res 147, 203–235 (2020) doi:10.1007/s11205-019-02150-8

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  • Child benefits
  • Compensation index
  • Horizontal equity
  • Microsimulation

JEL Classification

  • C81
  • D31
  • H53
  • I38