Taxation, Reranking and Equivalence Scales
AbstractThis paper considers whether an equivalence scale implicit in transfer policy can be inferred from summary measures of reranking. It is conjectured that, if the government has a distributional objective and formulates tax policy with a view to equitable treatment of income units, then adopting the scale that is implicit in government transfer policy should only identify reranking that has no equity foundation. This motivates the question: Is the incidence of reranking associated with a transfer system minimised by the equivalence scale that is implicit in the transfer system? The analysis presented in this paper suggests that the equivalence scale which minimises reranking, while not necessarily equal to the closest approximation to the one that is implicit in transfer policy, is nevertheless in its vicinity
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Date of creation: Jan 2004
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Other versions of this item:
- Creedy, J. & van de Ven, J., 2001. "Taxation, Reranking and Equivalence Scales," Department of Economics - Working Papers Series 782, The University of Melbourne.
- Justin van de Ven & John Creedy, 2003. "Taxation, Reranking and Equivalence Scales," Treasury Working Paper Series 03/11, New Zealand Treasury.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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