Contributions of taxes and benefits to vertical, horizontal and redistributive effects
AbstractThis paper develops new decompositions of the redistributive, vertical and horizontal effects of the fiscal system, revealing the contributions of different tax and benefit instruments. This new methodology brings together two widely acknowledged approaches in the study of income inequality and redistribution: Kakwani’s (1984) decomposition of redistributive effect into vertical and horizontal effects and Lerman and Yitzhaki’s (1985) decomposition of marginal changes in income inequality into contributions of different income components. The roles of taxes and benefits in achieving vertical, horizontal and redistributive effects are evaluated on the post- and pre-fiscal income margins, as well as on other margins between the borderline ones. Applications to hypothetical and real-world data indicate the suitability of decompositions for cross-country comparisons of tax-benefit systems.
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Bibliographic InfoPaper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 252.
Length: 32 pages
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Decomposition; Inequality; Horizontal Inequity; Redistribution; Taxes; Benefits;
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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- Mitja ÄŒok & Ivica Urban & Miroslav VerbiÄ, 2013.
"Income Redistribution through Taxes and Social Benefits: The Case of Slovenia and Croatia,"
Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 667-686, September.
- Cok, Mitja & Urban, Ivica & Verbič, Miroslav, 2012. "Income redistribution through taxes and social benefits: the case of Slovenia and Croatia," MPRA Paper 38918, University Library of Munich, Germany.
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