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Partial Horizontal Inequity Orderings: A Non-parametric Approach

  • Juan Gabriel Rodríguez
  • Rafael Salas
  • Irene Perrote

We provide a partial ordering view of horizontal inequity (HI), based on the Lorenz criterion, associated with different post-tax income distributions and a (bistochastic) non-parametric estimated benchmark distribution. As a consequence, several measures consistent with the Lorenz criterion can be rationalized. In addition, we establish the so-called HI transfer principle, which imposes a normative minimum requirement that any HI measure must satisfy. Our proposed HI ordering is consistent with this principle. Moreover, we adopt a cardinal view to decompose the total effect of a tax system into a welfare gain caused by HI-free income redistribution and a welfare loss caused by HI, without any additive decomposable restriction on the indices. Hence, more robust tests can be applied. Other decompositions in the literature are seen as particular cases. Copyright 2005 Blackwell Publishing Ltd.

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 67 (2005)
Issue (Month): 3 (06)
Pages: 347-368

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Handle: RePEc:bla:obuest:v:67:y:2005:i:3:p:347-368
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  1. Russell Davidson & Jean-Yves Duclos, 2000. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Econometrica, Econometric Society, vol. 68(6), pages 1435-1464, November.
  2. Peter Lambert & Simon Parker, 1997. "Testing for horizontal inequity econometrically," IFS Working Papers W97/18, Institute for Fiscal Studies.
  3. Stephen Jenkins & Peter Lambert, . "Horizontal Inequity Measurement: A Basic Reassessment," Discussion Papers 96/21, Department of Economics, University of York.
  4. Jenkins, Stephen P., 1988. "Empirical measurement of horizontal inequity," Journal of Public Economics, Elsevier, vol. 37(3), pages 305-329, December.
  5. Jean-Yves Duclos & Peter J. Lambert, 2000. "A normative and statistical approach to measuring classical horizontal inequity," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 87-113, February.
  6. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
  7. Cowell, Frank A. & Victoria-Feser, Maria-Pia, 1996. "Poverty measurement with contaminated data: A robust approach," European Economic Review, Elsevier, vol. 40(9), pages 1761-1771, December.
  8. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-88, May.
  9. 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.
  10. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  11. 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.
  12. Mervyn A. King, 1980. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," NBER Working Papers 0468, National Bureau of Economic Research, Inc.
  13. Lambert, P & Ramos, X, 1995. "Vertical redistribution and horizontal inequity," IFS Working Papers W95/01, Institute for Fiscal Studies.
  14. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
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