A New Measure of Horizontal Equity
AbstractIn this paper, we propose a new measure of horizontal equity that overcomes many of the shortcomings of previous proposed measures. Our starting point is the observation that a well-behaved social welfare function need not evaluate global' (vertical equity) differences in after-tax income using the same weights it applies to local' (horizontal equity) differences, even though this constraint has been applied in the past. Following work on the structure of individual preferences, we show that a social welfare function can imply different preferences toward horizontal and vertical equity. Adopting the general approach to the measurement of inequality developed by Atkinson (1970), we use such a social welfare function to derive measures of inequality that are decomposable into components naturally interpreted as indices of horizontal and vertical equity. In particular, the former index measures deviations from the fundamental principle that equals be treated equally. Finally, we apply our new measure to two tax-return data sets, evaluating the degree to which the horizontal equity of the US personal income tax has changed over time, and how horizontal equity would be altered by one version of recent proposals to do away with the so-called marriage penalty.'
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7035.
Date of creation: Mar 1999
Date of revision:
Publication status: published as Auerbach, Alan J. and Kevin A. Hassett. "A New Measure Of Horizontal Equity," American Economic Review, 2002, v92(4,Sep), 1116-1125.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan J. Auerbach & Kevin A. Hassett, 1999.
"A New Measure of Horizontal Equity,"
NBER Working Papers
7035, National Bureau of Economic Research, Inc.
- Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-88, May.
- 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.
- Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
- Stiglitz, Joseph E., 1982.
"Utilitarianism and horizontal equity : The case for random taxation,"
Journal of Public Economics,
Elsevier, vol. 18(1), pages 1-33, June.
- Joseph E. Stiglitz, 1981. "Utilitarianism and Horizontal Equity: The Case for Random Taxation," NBER Working Papers 0694, National Bureau of Economic Research, Inc.
- Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
- Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
- Kreps, David M & Porteus, Evan L, 1978.
"Temporal Resolution of Uncertainty and Dynamic Choice Theory,"
Econometric Society, vol. 46(1), pages 185-200, January.
- David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
- Louis Kaplow, 1985. "Horizontal Equity: Measures in Search of a Principle," NBER Working Papers 1679, National Bureau of Economic Research, Inc.
- Peter Lambert & Xavier Ramos, 1997. "Horizontal Inequity and Vertical Redistribution," International Tax and Public Finance, Springer, vol. 4(1), pages 25-37, January.
- 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.
- 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.
- Rosen, Harvey S, 1978. "An Approach to the Study of Income, Utility, and Horizontal Equity," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 307-22, May.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.