IDEAS home Printed from https://ideas.repec.org/p/nzt/nztwps/14-13.html
   My bibliography  Save this paper

The Role of Value Judgements in Measuring Inequality

Author

Listed:

Abstract

When measuring inequality, value judgements are imposed, often implicitly, at several stages. In particular, the choice of ‘welfare metric’, adult equivalence scale, unit of analysis and the inequality measure itself cannot avoid value judgements. This paper illustrates the effects of using different distributions and summary measures, using New Zealand data for the period 2007 to 2011. Using an annual accounting period, alternative welfare metrics and units of analysis are investigated. In addition, the sensitivity to assumptions about economies of scale within households is examined, and changes in inequality are decomposed into those arising from population and tax structure changes. When considering the period 2007 to 2010 all measures agree that inequality fell, although the extent of the reduction varies. For the period 2007 to 2011 (after the tax reforms of 2010) the answer to the question of whether inequality in New Zealand has risen or fallen depends crucially on the combination of welfare metric, income unit, adult equivalent scale and inequality measure used. In empirical studies it is therefore important to explore a wide range of alternative approaches, providing information for readers to make their own judgements.

Suggested Citation

  • John Creedy & Jesse Eedrah, 2014. "The Role of Value Judgements in Measuring Inequality," Treasury Working Paper Series 14/13, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:14/13
    as

    Download full text from publisher

    File URL: https://treasury.govt.nz/sites/default/files/2014-11/twp14-13.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-890, July.
    2. Olivier Bargain, 2012. "The Distributional Effects of Tax-benefit Policies under New Labour: A Decomposition Approach-super-," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(6), pages 856-874, December.
    3. John Creedy & Nicolas Hérault†, 2011. "Decomposing Inequality and Social Welfare Changes : The Use of Alternative Welfare Metrics," Department of Economics - Working Papers Series 1121, The University of Melbourne.
    4. John Creedy & Angela Mellish, 2011. "Changes in the tax mix from income taxation to GST: Revenue and redistribution," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 299-309, May.
    5. Cutler, David M & Katz, Lawrence F, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980's," American Economic Review, American Economic Association, vol. 82(2), pages 546-551, May.
    6. André Decoster & Erwin Ooghe, 2002. "Weighting with individuals, equivalent individuals, or not weighting at all. Does it matter empirically?," Public Economics Working Paper Series ces0215, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    7. Glewwe, Paul, 1991. "Household equivalence scales and the measurement of inequality : Transfers from the poor to the rich could decrease inequality," Journal of Public Economics, Elsevier, vol. 44(2), pages 211-216, March.
    8. John Creedy & Cath Sleeman, 2005. "Adult equivalence scales, inequality and poverty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 39(1), pages 51-81.
    9. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    10. Olivier Bargain, 2012. "Decomposition analysis of distributive policies using behavioural simulations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 708-731, October.
    11. Omar A Aziz & Christopher Ball & John Creedy & Jesse Eedrah, 2013. "The Distributional Impact of Population Ageing," Treasury Working Paper Series 13/13, New Zealand Treasury.
    12. Anthony Shorrocks, 2004. "Inequality and welfare evaluation of heterogeneous income distributions," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 2(3), pages 193-218, July.
    13. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    14. Dean Hyslop & Suresh Yahanpath, 2005. "Income Growth and Earnings Variations in New Zealand, 1998—2004," Treasury Working Paper Series 05/11, New Zealand Treasury.
    15. Anthony F. Shorrocks, 2004. "Inequality and Welfare Evaluation of Heterogeneous Income Distributions," WIDER Working Paper Series RP2004-01, World Institute for Development Economic Research (UNU-WIDER).
    16. John Creedy & Rosanna Scutella, 2004. "The Role of the Unit of Analysis in Tax Policy Return Evaluations of Inequality and Social Welfare," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 89-108, March.
    17. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benjamin Ching & Tayla Forward & Oscar Parkyn, 2023. "Estimating the Distribution of Wealth in New Zealand," Treasury Working Paper Series 23/01, New Zealand Treasury.
    2. Nolan, Matt, 2018. "Did tax-transfer policy change New Zealand disposable income inequality between 1988 and 2013?," Working Paper Series 7661, Victoria University of Wellington, Chair in Public Finance.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    2. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    3. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    4. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    5. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    6. Creedy, John & Guest, Ross, 2008. "Population ageing and intertemporal consumption: Representative agent versus social planner," Economic Modelling, Elsevier, vol. 25(3), pages 485-498, May.
    7. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    8. John Creedy & Cath Sleeman, 2005. "Adult equivalence scales, inequality and poverty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 39(1), pages 51-81.
    9. John Creedy, 2017. "Alternative Distributions for Inequality Comparisons," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(4), pages 484-497, December.
    10. Creedy, John & Quy, Ta, 2022. "Income Mobility in New Zealand 2007–2020: Combining Household Survey and Census Data," Working Paper Series 25797, Victoria University of Wellington, Chair in Public Finance.
    11. Nicolas Herault & Francisco Azpitarte, 2014. "Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Transfer System Account for the Decline in Redistribution?," Melbourne Institute Working Paper Series wp2014n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    12. John Creedy & Catherine Sleeman, 2004. "Adult Equivalence Scales, Inequality and Poverty in New Zealand," Treasury Working Paper Series 04/21, New Zealand Treasury.
    13. John Creedy & Rosanna Scutella, 2004. "The Role of the Unit of Analysis in Tax Policy Return Evaluations of Inequality and Social Welfare," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 89-108, March.
    14. John Creedy & Rosanna Scutella, 2003. "The Role of the Unit of Analysis in Tax Policy Reform Evaluations," Melbourne Institute Working Paper Series wp2003n28, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    15. John Creedy & Ross Guest, 2007. "Discounting and the Time Preference Rate: An Introduction," Department of Economics - Working Papers Series 993, The University of Melbourne.
    16. John Creedy & Ross Guest, 2008. "Discounting and the Time Preference Rate," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 109-127, March.
    17. Johannes König & Carsten Schröder, 2018. "Inequality-minimization with a given public budget," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(4), pages 607-629, December.
    18. repec:zbw:hohpro:331 is not listed on IDEAS
    19. Udo Ebert, 2008. "Living Standard, Social Welfare, and the Redistribution of Income in a Heterogeneous Population," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 873-889, October.
    20. John Creedy & Nicolas Hérault†, 2011. "Decomposing Inequality and Social Welfare Changes : The Use of Alternative Welfare Metrics," Department of Economics - Working Papers Series 1121, The University of Melbourne.
    21. Martin Biewen & Andos Juhasz, 2017. "Direct Estimation of Equivalence Scales and More Evidence on Independence of Base," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 875-905, October.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzt:nztwps:14/13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CSS Web and Publishing, The Treasury (email available below). General contact details of provider: https://edirc.repec.org/data/tregvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.