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Redistributive Effect of U.S. Taxes and Public Transfers, 1994-2004

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  • Kinam Kim

    (Ministry for Health, Welfare and Family Affairs, Republic of Korea)

  • Peter J. Lambert

    (University of Oregon)

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    Abstract

    In this study, the authors derive measures of the redistributive effect of taxes and welfare expenditures for the United States using Current Population Survey data for the years 1994, 1999, and 2004. The authors find that while income inequality increased, the redistributive effect of taxes and public transfers together reduced market income inequality by approximately 30 percent. In 2004, 88 percent of the net redistributive effect resulted from public transfers and 12 percent from taxes. The total redistributive effect would have improved by 35 percent in 2004 if horizontal inequities in taxes and public transfers could have been eliminated.

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    Bibliographic Info

    Article provided by in its journal Public Finance Review.

    Volume (Year): 37 (2009)
    Issue (Month): 1 (January)
    Pages: 3-26

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    Handle: RePEc:sae:pubfin:v:37:y:2009:i:1:p:3-26

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    Related research

    Keywords: redistributive effect; vertical equity; horizontal inequity; reranking;

    References

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    1. Burkhauser, Richard V. & Smeeding, Timothy M. & Merz, Joachim, 1994. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," MPRA Paper 7229, University Library of Munich, Germany.
    2. Ximing Wu & Jeffrey M. Perloff & Amos Golan, 2006. "Effects Of Government Policies On Urban And Rural Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(2), pages 213-235, 06.
    3. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-88, May.
    4. Ivica Urban & Peter J. Lambert, 2005. "Redistribution, horizontal inequity and reranking: how to measure them properly," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2005-12, University of Oregon Economics Department.
    5. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 642-64, August.
    6. Bishop, John A & Formby, John P & Zeager, Lester A, 1996. "The Impact of Food Stamps on US Poverty in the 1980s: A Marginal Dominance Analysis," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 63(250), pages S141-62, Suppl..
    7. Jenkins, Stephen, 1988. "Reranking and the Analysis of Income Redistribution," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 65-76, February.
    8. Jin Kwon Hyun & Byung-In Lim, 2005. "Redistributive effect of Korea's income tax: equity decomposition," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(3), pages 195-198.
    9. Wagstaff, Adam & van Doorslaer, Eddy & van der Burg, Hattem & Calonge, Samuel & Christiansen, Terkel & Citoni, Guido & Gerdtham, Ulf-G. & Gerfin, Michael & Gross, Lorna & Hakinnen, Unto, 1999. "Redistributive effect, progressivity and differential tax treatment: Personal income taxes in twelve OECD countries," Journal of Public Economics, Elsevier, Elsevier, vol. 72(1), pages 73-98, April.
    10. Wallace E. Oates, 2006. "On the Theory and Practice of Fiscal Decentralization," Working Papers, University of Kentucky, Institute for Federalism and Intergovernmental Relations 2006-05, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    11. van de Ven, Justin & Creedy, John & Lambert, Peter J, 2001. " Close Equals and Calculation of the Vertical, Horizontal and Reranking Effects of Taxation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(3), pages 381-94, July.
    12. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(423), pages 262-70, March.
    13. Chernick, Howard, 2005. "On the Determinants of Subnational Tax Progressivity in the U.S," National Tax Journal, National Tax Association, vol. 58(1), pages 93-112, March.
    14. Ebert, Udo, 1997. "Social Welfare When Needs Differ: An Axiomatic Approach," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(254), pages 233-44, May.
    15. Cutler, David M & Katz, Lawrence F, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980's," American Economic Review, American Economic Association, American Economic Association, vol. 82(2), pages 546-51, May.
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    17. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 87(345), pages 71-80, March.
    18. Edward N. Wolff & Ajit Zacharias, 2007. "The Distributional Consequences Of Government Spending And Taxation In The U.S., 1989 And 2000," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(4), pages 692-715, December.
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    Cited by:
    1. Abu-Zaineh, Mohammad & Mataria, Awad & Luchini, Stéphane & Moatti, Jean-Paul, 2009. "Equity in health care finance in Palestine: The triple effects revealed," Journal of Health Economics, Elsevier, Elsevier, vol. 28(6), pages 1071-1080, December.
    2. Ivica Urban, 2014. "Contributions of taxes and benefits to vertical and horizontal effects," Social Choice and Welfare, Springer, Springer, vol. 42(3), pages 619-645, March.

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