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Kakwani decomposition of redistributive effect: Origins, critics and upgrades

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  • Ivica Urban

    () (Institute of Public Finance, Zagreb)

Abstract

Kakwani decomposition of redistributive effect into vertical and reranking terms is one of the most widely used tools in measurement of income redistribution. This paper describes how the decomposition has emerged, how its proponents managed to expand and upgrade it, and how extensively it has been employed in empirical research. However, the arguments are presented that the decomposition features certain methodological problems and it is therefore called for its reinterpretation.

Suggested Citation

  • Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2009-148
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2009-148.pdf
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    Cited by:

    1. Ivica Urban, 2009. "Indices of redistributive effect and reranking: reinterpretation," Working Papers 147, ECINEQ, Society for the Study of Economic Inequality.
    2. Nicolas Herault & Francisco Azpitarte, 2014. "Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Transfer System Account for the Decline in Redistribution?," Melbourne Institute Working Paper Series wp2014n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Orsetta Causa & Mikkel Hermansen, 2018. "Income Redistribution Through Taxes and Transfers across OECD Countries," LIS Working papers 729, LIS Cross-National Data Center in Luxembourg.
    4. Nora Lustig, 2011. "Commitment to Equity Assessment (CEQ) A Diagnostic Framework to Assess Governments' Fiscal Policies Handbook," Working Papers 1119, Tulane University, Department of Economics.
    5. Elvire Guillaud & Matthew Olckers & Michaël Zemmour, 2017. "Four levers of redistribution: The impact of tax and transfer systems on inequality reduction," LIS Working papers 695, LIS Cross-National Data Center in Luxembourg.
    6. Zhu, Junyi, 2015. "Bracket creep revisited - with and without r>g: Evidence from Germany," Discussion Papers 37/2015, Deutsche Bundesbank.
    7. Orsetta Causa & Mikkel Hermansen, 2017. "Income redistribution through taxes and transfers across OECD countries," OECD Economics Department Working Papers 1453, OECD Publishing.
    8. Flores Unzaga, Ismael Martin & Zhu, Junyi, 2014. "Bracket Creep Revisited: Progressivity and a Solution by Adjusting the Rich Tax in Germany," MPRA Paper 57664, University Library of Munich, Germany.
    9. Nora Lustig & Sean Higgins, 2012. "Commitment to Equity Assessment (CEQ): Estimating the Incidence of Social Spending, Subsidies and Taxes Handbook," Working Papers 1219, Tulane University, Department of Economics.
    10. Ivica Urban, 2010. "Decomposing Redistributive and Reranking Effects to Reveal Contributions of Taxes and Benefits," wiiw Balkan Observatory Working Papers 85, The Vienna Institute for International Economic Studies, wiiw.
    11. Carlos Farinha Rodrigues & Isabel Andrade, 2013. "Robin Hood versus Piggy Bank: Income redistribution in Portugal 2006-10," Working Papers Department of Economics 2013/28, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    12. Ali Enami & Nora Lustig & Rodrigo Aranda, 2016. "Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers," Commitment to Equity (CEQ) Working Paper Series 25, Tulane University, Department of Economics.
    13. Nora Lustig, 2011. "Commitment to Equity Assessment (CEQ): A Diagnostic Framework to Assess Governments' Fiscal Policies Handbook," Working Papers 1122, Tulane University, Department of Economics.
    14. Nora Lustig, 2016. "Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 1301, Tulane University, Department of Economics.
    15. Nolan, Matt, 2018. "Horizontal and Vertical Equity in the New Zealand Tax-Transfer System: 1988-2013," Working Paper Series 7657, Victoria University of Wellington, Chair in Public Finance.
    16. Nicolas Herault & Francisco Azpitarte, 2013. "Understanding Changes in Progressivity and Redistributive Effects: The Role of Tax-Transfer Policies and Labour Supply Decisions," Melbourne Institute Working Paper Series wp2013n33, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    17. Carlos Farinha Rodrigues & Isabel Andrade, 2014. "Robin Hood versus Piggy Bank: Income Redistribution in Portugal 2006-2010," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(5), pages 617-630, October.
    18. Flores Unzaga, Ismael Martin & Zhu, Junyi, 2014. "Bracket Creep Revisited: Progressivity and a Solution by Adjusting the Rich Tax in Germany," EconStor Preprints 100006, ZBW - German National Library of Economics.

    More about this item

    Keywords

    income redistribution; Kakwani decomposition; reranking; horizontal inequity; progressivity;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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