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Partial Horizontal Inequity Orderings: A non-parametric Approach

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Abstract

We provide a partial ordering view of horizontal inequity (henceforth HI), based on the Lorenz criterion, associated with different post-tax income distributions and a (bistochastic) nonparametric estimated benchmark distribution. As a consequence, several measures consistent with the Lorenz criterion can be rationalized. In addition, we establish the so-called horizontal inequity 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 due to HI-free income redistribution and a welfare loss due to 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.

Suggested Citation

  • Juan Gabriel Rodríguez & Rafael Salas & Irene Perrote, 2004. "Partial Horizontal Inequity Orderings: A non-parametric Approach," Economic Working Papers at Centro de Estudios Andaluces E2004/01, Centro de Estudios Andaluces.
    • Handle: RePEc:cea:doctra:e2004_01
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    14. Salas, Rafael, 1998. "Horizontal Inequality and Vertical Redistribution in a Social Welfare Framework," Public Finance = Finances publiques, , vol. 53(2), pages 229-242.
    15. Duclos, Jean-Yves, 1993. "Progressivity, Redistribution, and Equity, with Application to the British Tax and Benefit System," Public Finance = Finances publiques, , vol. 48(3), pages 350-365.
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    19. 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.
    20. Justin Van De Ven & John Creedy & Peter J. Lambert, 2001. "Close Equals and Calculation of the Vertical, Horizontal and Reranking Effects of Taxation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(3), pages 381-394, July.
    21. Peter Lambert, & Xavier Ramos, 1995. "Vertical redistribution and horizontal inequity," IFS Working Papers W95/01, Institute for Fiscal Studies.
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    Cited by:

    1. Paul Allanson, 2007. "Classical Horizontal Inequities in the Provision of Agricultural Income Support," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(4), pages 656-671.
    2. Paul Allanson & Benedetto Rocchi, 2008. "A comparative analysis of the redistributive effects of agricultural policy in Tuscany and Scotland," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 35-56.
    3. Paul Allanson, 2008. "On the Characterisation and Measurement of the Redistributive Effect of Agricultural Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 169-187, February.
    4. Juan C Palomino & Gustavo A Marrero & Brian Nolan & Juan G Rodríguez, 2022. "Wealth inequality, intergenerational transfers, and family background [Intergenerational wealth mobility and the role of inheritance: Evidence from multiple generations]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 643-670.
    5. Juan Gabriel Rodríguez & Rafael Salas, 2004. "A Bistochastic Nonparametric Estimator," Economic Working Papers at Centro de Estudios Andaluces E2004/22, Centro de Estudios Andaluces.
    6. Juan C. Palomino & Gustavo A. Marrero & Brian Nolan & Juan G. Rodriguez, 2020. "Wealth inequality, intergenerational transfers and socioeconomic background," Working Papers 537, ECINEQ, Society for the Study of Economic Inequality.
    7. Luis José Imedio Olmedo & Encarnación Macarena Parrado Gallardo & María Dolores Sarrión Gavilán, 2005. "Horizontal equity, equal progression: an utilitarian approach," Hacienda Pública Española / Review of Public Economics, IEF, vol. 174(3), pages 87-115, September.

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    More about this item

    Keywords

    vertical redistribution; horizontal inequity; social welfare; non-parametric estimation.;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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