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Statistical Inference for the Measurement of the Incidence of Taxes and Transfers

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  • Davidson, R.
  • Duclos, J.Y.

Abstract

We establish the asymptotic sampling distribution of general functions of quantile-based estimators computed from samples that are not necessarily independent. The results provide the statistical framework within which to assess the progressivity of taxes and benefits, their horizontal inequity, and the change in the inequality of income which they cause. By the same token, these findings characterise the sampling distribution of a number of popular indices of progressivity, horizontal inequity, and redistribution. They can also be used to assess welfare and inequality changes using panel data, and to assess poverty when it depends on estimated population quantiles. We illustrate these results using micro data on the incidence of taxes and benefits in Canada.
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Suggested Citation

  • Davidson, R. & Duclos, J.Y., 1995. "Statistical Inference for the Measurement of the Incidence of Taxes and Transfers," G.R.E.Q.A.M. 95a30, Universite Aix-Marseille III.
    • Handle: RePEc:fth:aixmeq:95a30
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    References listed on IDEAS

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    1. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(1), pages 45-59, March.
    2. Charles M. Beach & Russell Davidson & George A. Slotsve, 1994. "Distribution-Free Statistical Inference for Inequality Dominance with Crossing Lorenz Curves," Working Paper 912, Economics Department, Queen's University.
    3. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
    4. Davies, James & Hoy, Michael, 1995. "Making Inequality Comparisons When Lorenz Curves Intersect," American Economic Review, American Economic Association, vol. 85(4), pages 980-986, September.
    5. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association, vol. 48(1), pages 45-59, March.
    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. Mehran, Farhad, 1976. "Linear Measures of Income Inequality," Econometrica, Econometric Society, vol. 44(4), pages 805-809, July.
    8. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
    9. Plotnick, Robert, 1982. "The concept and measurement of horizontal inequity," Journal of Public Economics, Elsevier, vol. 17(3), pages 373-391, April.
    10. Blackorby, Charles & Bossert, Walter & Donaldson, David, 1994. "Generalized Ginis and Cooperative Bargaining Solutions," Econometrica, Econometric Society, vol. 62(5), pages 1161-1178, September.
    11. 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.
    12. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56, pages 498-498.
    13. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-752, September.
    14. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
    15. John P. Formby & W. James Smith & Paul D. Thistle, 1990. "The Average Tax Burden and the Welfare Implications of Global Tax Progressivity," Public Finance Review, , vol. 18(1), pages 3-24, January.
    16. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
    17. Charles M. Beach & Russell Davidson, 1983. "Distribution-Free Statistical Inference with Lorenz Curves and Income Shares," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 723-735.
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    More about this item

    Keywords

    STATISTICS; TAX POLICY;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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