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A Note on the Maximum Value of the Kakwani Index

Author

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  • Simone Pellegrino

    (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)

  • Achille Vernizzi

    (Department of Economics, Management and Quantitative Methods, University of Milan, Italy)

Abstract

The overall tax revenue of a real-world personal income tax cannot be eventually paid only by the richest taxpayer. Therefore, the maximum concentration coefficient for taxes cannot be equal to 1, and, consequently, the maximum value of the Kakwani index cannot be 1 minus the Gini coefficient for pre-tax incomes, as generally described in the related literature. We give evidence of this phenomenon by illustrating a theoretical example, and by evaluating its maximum value when a real-world tax is considered.

Suggested Citation

  • Simone Pellegrino & Achille Vernizzi, 2017. "A Note on the Maximum Value of the Kakwani Index," Working papers 047, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:047
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    References listed on IDEAS

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    1. Simone Pellegrino & Guido Perboli & Giovanni Squillero, 2019. "Balancing the equity-efficiency trade-off in personal income taxation: an evolutionary approach," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 37-64, April.
    2. Fellman, J, 1976. "The Effect of Transformations on Lorenz Curves," Econometrica, Econometric Society, vol. 44(4), pages 823-824, July.
    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. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
    5. Daniela Mantovani, 2017. "Comparing redistributive efficiency of tax-benefit systems in Europe," Center for the Analysis of Public Policies (CAPP) 0155, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    6. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    7. Simone Pellegrino & Achille Vernizzi, 2013. "On measuring violations of the progressive principle in income tax systems," Empirical Economics, Springer, vol. 45(1), pages 239-245, August.
    8. Fernando Di Nicola & Giorgio Mongelli & Simone Pellegrino, 2015. "The static microsimulation model of the Italian Department of Finance: Structure and first results regarding income and housing taxation," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2015(2), pages 125-157.
    9. Keen, Michael & Papapanagos, Harry & Shorrocks, Anthony, 2000. "Tax Reform and Progressivity," Economic Journal, Royal Economic Society, vol. 110(460), pages 50-68, January.
    10. Jenkins, Stephen, 1988. "Calculating Income Distribution Indices From Micro-Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(1), pages 139-142, March.
    11. Daniela Mantovani, 2017. "Comparing redistributive efficiency of tax-benefit systems in Europe," Department of Economics 0114, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    12. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
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    Cited by:

    1. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.
    2. Nanak Kakwani & Hyun Hwa Son, 2021. "Normative Measures of Tax Progressivity: an International Comparison," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(1), pages 185-212, March.

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    More about this item

    Keywords

    Kakwani index; Redistributive effect; Personal income tax; Microsimulation models.;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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