Recently van De Van, Creedy and Lambert (2001) and Lambert and Urban (2005) have reconsidered the original Aronson, Johnson and Lambert (1994) decomposition of the redistributive effect in order to properly evaluate personal income tax reforms, when sequential income groups do not concern exact equals. Lambert and Urban (2005) decompose the Atkinson-Plotnick-Kakwani index into three terms. We utilize this decomposition in choosing the optimal bandwidth and suggest to consider not only the highest vertical contribution to the redistributive effect, but also the horizontal inequity due to the reranking of the mean post-tax income among groups. Findings are applied to Italian data with respect to both individual nominal incomes and equivalent household incomes
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Paper provided by Department of Economics University of Milan Italy in its series Departemental Working Papers with number
2007-13.
Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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