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On the Aronson-Johnson-Lambert decomposition of the redistributive effect

Author

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  • Achille VERNIZZI
  • Simone PELLEGRINO

Abstract

Recently van De Van, Creedy and Lambert (2001) and Lambert and Urban (2005) have reconsidered the original Aronson, Johnson and Lambert (1994) decomposition of the redistributive effect in order to properly evaluate personal income tax reforms, when sequential income groups do not concern exact equals. Lambert and Urban (2005) decompose the Atkinson-Plotnick-Kakwani index into three terms. We utilize this decomposition in choosing the optimal bandwidth and suggest to consider not only the highest vertical contribution to the redistributive effect, but also the horizontal inequity due to the reranking of the mean post-tax income among groups. Findings are applied to Italian data with respect to both individual nominal incomes and equivalent household incomes

Suggested Citation

  • Achille VERNIZZI & Simone PELLEGRINO, 2007. "On the Aronson-Johnson-Lambert decomposition of the redistributive effect," Departmental Working Papers 2007-013, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 26 Jun 2007.
    • Handle: RePEc:mil:wpdepa:2007-013
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    More about this item

    Keywords

    Personal Income Tax; Redistributive Effect; Horizontal Inequity; Reranking;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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