Identifying Tax Implicit Equivalence Scales
This paper describes a simple and tractable method for identifying equivalence scales that reflect the value judgements implicit in a tax and benefits system. The approach depends upon two assumptions that are standard in the literature concerned with inequality and tax progressivity, in addition to a functional description for transfer payments that can be estimated using common micro-data sources. We use this approach to evaluate tax implicit equivalence scales for the UK transfer system that applied in April 2009. The tax implicit scales that we identify for the UK vary positively with tax unit size and are decreasing in gross earnings, reflecting recent econometric estimates based on consumption data. We conclude by discussing a range of potential applications for the proposed tax implicit scales.
|Date of creation:||Mar 2014|
|Contact details of provider:|| Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia|
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://melbourneinstitute.unimelb.edu.au/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Koulovatianos, Christos & Schroder, Carsten & Schmidt, Ulrich, 2005.
"On the income dependence of equivalence scales,"
Journal of Public Economics,
Elsevier, vol. 89(5-6), pages 967-996, June.
- van de Ven, Justin & Creedy, John & Lambert, Peter J, 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.
- Creedy, J. & Lambert, P.J. & van de Ven, J., 2001. "Close Equals and Calculation of the Vertical, Horizontal and Reranking Effects of Taxation," Department of Economics - Working Papers Series 781, The University of Melbourne.
- Mark B. Stewart, 2009.
"The Estimation Of Pensioner Equivalence Scales Using Subjective Data,"
Review of Income and Wealth,
International Association for Research in Income and Wealth, vol. 55(4), pages 907-929, December.
- Stewart, Mark B., 2009. "The estimation of pensioner equivalence scales using subjective data," The Warwick Economics Research Paper Series (TWERPS) 893, University of Warwick, Department of Economics.
- Olken, Benjamin A., 2005. "Revealed community equivalence scales," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 545-566, February.
- Udo Ebert & Peter J. Lambert, 2004.
"Horizontal Equity and Progression When Equivalence Scales Are Not Constant,"
Public Finance Review,
, vol. 32(4), pages 426-440, July.
- Udo Ebert & Peter J Lambert, "undated". "Horizontal Equity and Progession when Equivalence Scales are not Constant," Discussion Papers 02/02, Department of Economics, University of York.
- R Blundell & Steven Bond, "undated".
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Lambert, Peter J, 1993. "Inequality Reduction through the Income Tax," Economica, London School of Economics and Political Science, vol. 60(239), pages 357-365, August.
- Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
- John Muellbauer & Justin van de Ven, 2004.
"Estimating Equivalence Scales for Tax and Benefits Systems,"
2004-W06, Economics Group, Nuffield College, University of Oxford.
- Dr Justin van de Ven, 2004. "Estimating Equivalence Scales for Tax and Benefits Systems," NIESR Discussion Papers 229, National Institute of Economic and Social Research.
- Plotnick, Robert, 1982. "The concept and measurement of horizontal inequity," Journal of Public Economics, Elsevier, vol. 17(3), pages 373-391, April.
- repec:oxf:wpaper:2004-w06 is not listed on IDEAS
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
- Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
- 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.
- Seneca, Joseph J & Taussig, Michael K, 1971. "Family Equivalence Scales and Personal Income Tax Exemptions for Children," The Review of Economics and Statistics, MIT Press, vol. 53(3), pages 253-262, August.
- Pashardes, Panos, 1995. "Equivalence scales in a rank-3 demand system," Journal of Public Economics, Elsevier, vol. 58(1), pages 143-158, September.
- Szulc, Adam, 2009. "A matching estimator of household equivalence scales," Economics Letters, Elsevier, vol. 103(2), pages 81-83, May.
- Jenkins, Stephen, 1988. "Reranking and the Analysis of Income Redistribution," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 65-76, February.
- Lewbel, Arthur, 1989. "Household equivalence scales and welfare comparisons," Journal of Public Economics, Elsevier, vol. 39(3), pages 377-391, August.
- Muellbauer, John, 1975. "The cost of living and taste and quality change," Journal of Economic Theory, Elsevier, vol. 10(3), pages 269-283, June.
- de Ree, Joppe & Alessie, Rob & Pradhan, Menno, 2013. "The price and utility dependence of equivalence scales: Evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 97(C), pages 272-281.
When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2014n03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Abbey Treloar)
If references are entirely missing, you can add them using this form.