Close Equals and Calculation of the Vertical, Horizontal and Reranking Effects of Taxation
AbstractThis paper examines the Gini-based method of decomposing the redistributive effect of taxation into vertical, horizontal, and reranking components. The consequences of different bandwidth choices, used to identify close-equals groups to estimate the horizontal effect, are discussed. Two opposing forces are identified which militate against choosing a very small or large bandwidth. It is suggested that the best procedure is to use the bandwidth that maximises the estimated vertical component, compute the reranking component exactly as a sample statistic and obtain the horizontal effect by subtraction. The technique is used to analyse the progressivity of tax and transfer payments in Australia.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 781.
Length: 15 pages
Date of creation: 2001
Date of revision:
Note: This paper has now been published in: Van de Ven, J., Creedy, J. and Lambert P. (2001), Close Equals and Calculation of the Vertical, Horizontal and Reranking Effects of Taxation, Oxford Bulletin of Economics and Statistics, 63, no.3, pp. 381-394.
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TAXATION ; DISTRIBUTION ; STATISTICS;
Other versions of this item:
- 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.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- 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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- William Griffiths, 2008. "On Dagum’s Decomposition of the Gini Coefficient," Department of Economics - Working Papers Series 1054, The University of Melbourne.
- Wagstaff, Adam, 2005. "Decomposing changes in income inequality into vertical and horizontal redistribution and reranking, with applications to China and Vietnam," Policy Research Working Paper Series 3559, The World Bank.
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