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Base independence in the analysis of tax policy effects: with an application to Norway 1992–2004

  • Peter Lambert


  • Thor Thoresen


The analysis contrasts results of two recently expounded micro-level data approaches to derive robust intertemporal characterizations of redistributional effects of income tax schedules; the fixed-income procedure of Kasten, Sammartino and Toder (1994) and the transplant-and-compare method of Dardanoni and Lambert (2002). Our study is normative in that the Blackorby and Donaldson (1984) index of tax progressivity is employed. This enables contributions from vertical redistribution and horizontal inequity also to be assessed, using for the latter one classical measure and one no reranking measure. When the competing methodologies are applied to Norwegian data for 1992–2004, their respective strengths and weaknesses are revealed. The transplant-and-compare procedure is found to have a number of advantages.

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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 16 (2009)
Issue (Month): 2 (April)
Pages: 219-252

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Handle: RePEc:kap:itaxpf:v:16:y:2009:i:2:p:219-252
DOI: 10.1007/s10797-008-9067-y
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  1. Russell Davidson & James G. MacKinnon, 1981. "Tests for Model Specification in the Presence of Alternative Hypotheses: Some Further Results," Working Papers 430, Queen's University, Department of Economics.
  2. Xavier Ramos & Peter J Lambert, . "Horizontal Equity and Differences in Income Tax Treatment: A Reconciliation," Discussion Papers 98/24, Department of Economics, University of York.
  3. McCloskey, Donald N, 1985. "The Loss Function Has Been Mislaid: The Rhetoric of Significance Tests," American Economic Review, American Economic Association, vol. 75(2), pages 201-05, May.
  4. 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.
  5. Valentino Dardanoni & Peter Lambert, 2001. "Horizontal inequity comparisons," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(4), pages 799-816.
  6. Alan J. Auerbach & Kevin A. Hassett, 1999. "A New Measure of Horizontal Equity," NBER Working Papers 7035, National Bureau of Economic Research, Inc.
  7. Aarbu, Karl O. & Thoresen, Thor O., 2001. "Income Responses to Tax Changes--Evidence from the Norwegian Tax Reform," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 319-38, June.
  8. 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.
  9. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
  10. Pfahler, Wilhelm, 1987. "Redistributive Effects of Tax Progressivity: Evaluating a General Class of Aggregate Measures," Public Finance = Finances publiques, , vol. 42(1), pages 1-31.
  11. 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.
  12. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier.
  13. Stephen Jenkins & Peter Lambert, . "Horizontal Inequity Measurement: A Basic Reassessment," Discussion Papers 96/21, Department of Economics, University of York.
  14. P Lambert & X. Ramos, 1995. "Vertical redistribution and horizontal inequity," IFS Working Papers W95/01, Institute for Fiscal Studies.
  15. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  16. 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.
  17. Charles Blackorby & David Donaldson, 1984. "Ethical Social Index Numbers and the Measurement of Effective Tax-Benefit Progressivity," Canadian Journal of Economics, Canadian Economics Association, vol. 17(4), pages 683-94, November.
  18. Lambert, Peter J. & Millimet, Daniel L. & Slottje, Daniel, 2003. "Inequality aversion and the natural rate of subjective inequality," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1061-1090, May.
  19. Dardanoni, Valentino & Lambert, Peter J., 2002. "Progressivity comparisons," Journal of Public Economics, Elsevier, vol. 86(1), pages 99-122, October.
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