A Normative Approach to Measuring Classical Horizontal Inequity
AbstractThis paper makes a new attack on the old problem of measuring horizontal inequity (HI). A local measure of HI is proposed, and aggregated into a global index. Whilst other approaches have captured the welfare gain which would come from eliminating HI revenue-neutrally, our global index provides a measure of the revenue gain per capita which would come from eliminating HI welfare-neutrally. When expressed as a fraction of mean post-tax income, the measure can be viewed as a negative component in the Blackorby and Donaldson (1984) index of tax progressivity, quantifying the loss of vertical performance arising from differences in the tax treatment of equals. Being money-metric, the measure can also be easily and intuitively interpreted. We propose non- parametric estimation procedures to obviate the important Ã¾identification of equalsÃ¾ problem. To our knowledge, this provides the first consistent statistical solution to measuring classical horizontal inequity. The method is applied to the Canadian distributions of gross and net incomes in 1981 and 1990.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 97/3.
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Other versions of this item:
- Duclos, Jean-Yves & Lambert, Peter J., 1997. "A Normative Approach to Measuring Classical Horizontal Inequity," Cahiers de recherche 9701, Université Laval - Département d'économique.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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