This paper makes a new attack on the old problem of measuring horizontal inequity (HI). A local measure of HI is proposed, and aggregated into a global index. Whilst other approaches have captured the welfare gain which would come from eliminating HI revenue-neutrally, our global index provides a measure of the revenue gain per capita which would come from eliminating HI welfare-neutrally. When expressed as a fraction of mean post-tax income, the measure can be viewed as a negative component in the Blackorby and Donaldson (1984) index of tax progressivity, quantifying the loss of vertical performance arising from differences in the tax treatment of equals. Being money-metric, the measure can also be easily and intuitively interpreted. We propose non- parametric estimation procedures to obviate the important þidentification of equalsþ problem. To our knowledge, this provides the first consistent statistical solution to measuring classical horizontal inequity. The method is applied to the Canadian distributions of gross and net incomes in 1981 and 1990.
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Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number
9701.
Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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