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On the equivalence between progressive taxation and inequality reduction

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  • Biung-Ghi Ju

    ()

  • Juan Moreno-Ternero

    ()

Abstract

We establish the precise connections between progressive taxation and inequality reduction, in a setting where the level of tax revenue to be raised is exogenously fixed and tax schemes are balanced. We show that, in contrast with the traditional literature on taxation, the equivalence between inequality reduction and the combination of progressivity and income order preservation does not always hold in this setting. However, we show that, among rules satisfying consistency and, either revenue continuity, or revenue monotonicity, the equivalence remains intact.

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File URL: http://hdl.handle.net/10.1007/s00355-007-0254-z
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Bibliographic Info

Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 30 (2008)
Issue (Month): 4 (May)
Pages: 561-569

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Handle: RePEc:spr:sochwe:v:30:y:2008:i:4:p:561-569

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  1. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
  2. Thon, Dominique, 1987. "Redistributive properties of progressive taxation," Mathematical Social Sciences, Elsevier, vol. 14(2), pages 185-191, October.
  3. Fellman, J, 1976. "The Effect of Transformations on Lorenz Curves," Econometrica, Econometric Society, vol. 44(4), pages 823-24, July.
  4. Eichhorn, Wolfgang & Funke, Helmut & Richter, Wolfram F., 1984. "Tax progression and inequality of income distribution," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 127-131, October.
  5. Kakwani, Nanak C, 1977. "Applications of Lorenz Curves in Economic Analysis," Econometrica, Econometric Society, vol. 45(3), pages 719-27, April.
  6. Thomson, William, 2003. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: a survey," Mathematical Social Sciences, Elsevier, vol. 45(3), pages 249-297, July.
  7. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier.
  8. Young, H. P., 1988. "Distributive justice in taxation," Journal of Economic Theory, Elsevier, vol. 44(2), pages 321-335, April.
  9. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56, pages 498.
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Cited by:
  1. Kristof Bosmans & Erik Schokkaert, 2009. "Equality preference in the claims problem: a questionnaire study of cuts in earnings and pensions," Social Choice and Welfare, Springer, vol. 33(4), pages 533-557, November.
  2. Biung-Ghi Ju & Juan D. Moreno-Ternero, 2009. "Progressive and merging-proof taxation," Working Papers 2009-7, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  3. Kasajima, Yoichi & Velez, Rodrigo A., 2010. "Non-proportional inequality preservation in gains and losses," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1079-1092, November.
  4. Yoichi Kasajima & Rodrigo Velez, 2011. "Reflecting inequality of claims in gains and losses," Economic Theory, Springer, vol. 46(2), pages 283-295, February.
  5. HERRERO, Carmen & MORENO-TERNERO, Juan D. & PONTI, Giovanni, 2006. "On the adjudication of conflicting claims: an experimental study," CORE Discussion Papers 2006062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. JU, Biung-Ghi & MORENO-TERNERO, Juan D., 2006. "Progressivity, inequality reduction and merging-proofness in taxation," CORE Discussion Papers 2006075, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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