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Taxation, Reranking and Equivalence Scales

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  • Creedy, J.
  • van de Ven, J.

Abstract

This paper considers the relationship between equivalence scales and the reranking effects of taxation. The impact on reranking of varying an equivalence scale is divided into two effects. The first, referred to as the direct effect, increases reranking as the equivalence scale used departs from the scale that implicitly underlies the tax system. The second, referred to as the indirect effect, increases reranking as measures of adult equivalent income increase. It is argued that the equivalence scale that underlies a tax system is likely to be in the neighbourhood of the scale that minimises reranking Household data from Australia and the UK are analysed.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 782.

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Length: 32 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:mlb:wpaper:782

Note: This paper has now been published in: Creedy, J. and Van de Ven, J. (2005) Taxation, Reranking and Equivalence Scales, Bulletin of Economic Research, 57, no.1, pp. 13-36.
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Keywords: TAXATION ; TAX SYSTEMS ; INCOME;

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References

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  1. Musgrave, Richard A., 1990. "Horizontal Equity, Once More," National Tax Journal, National Tax Association, vol. 43(2), pages 113-22, June.
  2. Nolan, Brian, 1987. "Direct Taxation, Transfers and Reranking: Some Empirical Results for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(3), pages 273-90, August.
  3. Kakwani, Nanak & Lambert, Peter J., 1998. "On measuring inequity in taxation: a new approach," European Journal of Political Economy, Elsevier, vol. 14(2), pages 369-380, May.
  4. Jenkins, Stephen P., 1988. "Empirical measurement of horizontal inequity," Journal of Public Economics, Elsevier, vol. 37(3), pages 305-329, December.
  5. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  6. Peter Lambert & Xavier Ramos, 1997. "Horizontal Inequity and Vertical Redistribution," International Tax and Public Finance, Springer, vol. 4(1), pages 25-37, January.
  7. Gordon, David M, 1972. "Taxation of the Poor and the Normative Theory of Tax Incidence," American Economic Review, American Economic Association, vol. 62(2), pages 319-28, May.
  8. Jenkins, Stephen, 1988. "Reranking and the Analysis of Income Redistribution," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 65-76, February.
  9. Mervyn A. King, 1980. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," NBER Working Papers 0468, National Bureau of Economic Research, Inc.
  10. Fei, John C H, 1981. "Equity Oriented Fiscal Programs," Econometrica, Econometric Society, vol. 49(4), pages 869-81, June.
  11. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September.
  12. Creedy, John & van de Ven, Justin, 2001. "Decomposing Redistributive Effects of Taxes and Transfers in Australia: Annual and Lifetime Measures," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 185-98, June.
  13. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
  14. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association, vol. 48(1), pages 45-59, March.
  15. Christiansen, Vidar & Jansen, Eilev S., 1978. "Implicit social preferences in the Norwegian system of indirect taxation," Journal of Public Economics, Elsevier, vol. 10(2), pages 217-245, October.
  16. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-88, May.
  17. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, vol. 104(423), pages 262-70, March.
  18. King, Mervyn A, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," Econometrica, Econometric Society, vol. 51(1), pages 99-115, January.
  19. Cowell, Frank A, 1985. "Measures of Distributional Change: An Axiomatic Approach," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 135-51, January.
  20. Yitzhaki, Shlomo, 1983. "On an Extension of the Gini Inequality Index," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 617-28, October.
  21. Robert J. Brent, 1984. "Use of Distributional Weights in Cost-Benefit Analysis: a Survey of Schools," Public Finance Review, , vol. 12(2), pages 213-230, April.
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Cited by:
  1. John Creedy & Jamas Enright & Norman Gemmell & Nick McNabb, 2008. "Equity and Efficiency Measures of Tax-Transfer Systems: Some Evidence for New Zealand," Treasury Working Paper Series 08/04, New Zealand Treasury.
  2. John Creedy, 2006. "Evaluating Policy: Welfare Weights And Value Judgements," Department of Economics - Working Papers Series 971, The University of Melbourne.

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