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Redistribution, horizontal inequity and reranking: how to measure them properly

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Author Info
Ivica Urban (Institute of Public Finance, Zagreb, Croatia)
Peter J. Lambert () (University of Oregon Economics Department)

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Abstract

The decomposition of the redistributive effect of an income tax into vertical, horizontal and reranking contributions according to the model of Aronson, Johnson and Lambert (1994), henceforth AJL, is revisited. When close equals groups are used, rather than the exact equals groups upon which the model is predicated, problems arise. A new measurement system is proposed, in which three distinct forms of reranking are disentangled and the vertical and horizontal contributions are redefined. Other approaches to measuring equity in tax systems are set in context. Findings are applied to Croatian data, and recommendations for users of the AJL methodology are given.

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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2005-12.

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Length: 24
Date of creation: 01 Jul 2005
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Handle: RePEc:ore:uoecwp:2005-12

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Related research
Keywords: redistributive effect; vertical equity; horizontal inequity; reranking;

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Find related papers by JEL classification:
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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References listed on IDEAS
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.:
  1. Mervyn A. King, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," NBER Working Papers 0468, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Raúl Camarero & Octavio Herrero & Ignacio Zubiri, 1993. "La medición de la inequidad horizontal: teoría y una aplicación al caso de Vizcaya," Investigaciones Economicas, Fundación SEPI, vol. 17(2), pages 333-362, May. [Downloadable!]
  3. Lambert, Peter J & Aronson, J Richard, 1993. "Inequality Decomposition Analysis and the Gini Coefficient Revisited," Economic Journal, Royal Economic Society, vol. 103(420), pages 1221-27, September. [Downloadable!] (restricted)
  4. Lambert, P & Ramos, X, 1995. "Vertical redistribution and horizontal inequity," IFS Working Papers W95/01, Institute for Fiscal Studies.
  5. Jin Kwon Hyun & Byung-In Lim, 2005. "Redistributive effect of Korea's income tax: equity decomposition," Applied Economics Letters, Taylor and Francis Journals, vol. 12(3), pages 195-198, February. [Downloadable!] (restricted)
  6. Peter J. Lambert & Andre Decoster, 2004. "The Gini Coefficient Reveals More," University of Oregon Economics Department Working Papers 2004-18, University of Oregon Economics Department, revised 05 Dec 2004. [Downloadable!]
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  7. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-88, May. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. Mitja Cok & Ivica Urban, 2007. "Distribution of Income and Taxes in Slovenia and Croatia," Post-Communist Economies, Taylor and Francis Journals, vol. 19(3), pages 299-316. [Downloadable!] (restricted)
  10. Stephen Jenkins & Peter Lambert, . "Horizontal Inequity Measurement: A Basic Reassessment," Discussion Papers 96/21, Department of Economics, University of York.
  11. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Essama-Nssah, B., 2008. "Assessing the redistributive effect of fiscal policy," Policy Research Working Paper Series 4592, The World Bank. [Downloadable!]
  2. Kinam Kim & Peter J. Lambert, 2007. "Redistributive Effect of U.S. Taxes and Public Transfers, 1994-2004," University of Oregon Economics Department Working Papers 2007-3, University of Oregon Economics Department, revised 06 Feb 2007. [Downloadable!]
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