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Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers

Author

Listed:
  • Ali Enami

    () (Tulane University and CEQ Institute.)

  • Nora Lustig

    () (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQI). Tulane University.)

  • Rodrigo Aranda

    (Tulane University and CEQ Institute.)

Abstract

This paper provides a theoretical foundation for analyzing the redistributive effect of taxes and transfers for the case in which the ranking of individuals by pre-fiscal income remains unchanged. We show that in a world with more than a single fiscal instrument, the simple rule that progressive taxes or transfers are always equalizing not necessarily holds, and offer alternative rules that survive a theoretical scrutiny. In particular, we show that the sign of the marginal contribution unambiguously predicts whether a tax or a transfer is equalizing or not.

Suggested Citation

  • 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.
  • Handle: RePEc:tul:ceqwps:25
    as

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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq25.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    1. Engel, Eduardo M. R. A. & Galetovic, Alexander & Raddatz, Claudio E., 1999. "Taxes and income distribution in Chile: some unpleasant redistributive arithmetic," Journal of Development Economics, Elsevier, vol. 59(1), pages 155-192, June.
    2. Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, vol. 9(1), pages 51-89, December.
    3. repec:bla:revinw:v:27:y:1981:i:2:p:137-164 is not listed on IDEAS
    4. Anthony Shorrocks, 2013. "Decomposition procedures for distributional analysis: a unified framework based on the Shapley value," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 99-126, March.
    5. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    6. Jean-Yves Duclos & Martin Tabi, 1996. "The Measurement of Progressivity, with an Application to Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 165-170, April.
    7. Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
    8. Ruggles, Patricia & O'Higgins, Michael, 1981. "The Distribution of Public Expenditure among Households in the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(2), pages 137-164, June.
    9. Michael O'Higgins & Patricia Ruggles, 1981. "The Distribution Of Public Expenditures And Taxes Among Households In The United Kingdom," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(3), pages 298-326, September.
    10. Sean Higgins & Claudiney Pereira, 2014. "The Effects of Brazil’s Taxation and Social Spending on the Distribution of Household Income," Public Finance Review, , vol. 42(3), pages 346-367, May.
    11. Lerman, Robert I. & Yitzhaki, Shlomo, 1989. "Improving the accuracy of estimates of Gini coefficients," Journal of Econometrics, Elsevier, vol. 42(1), pages 43-47, September.
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    Cited by:

    1. Martinez Aguilar,Sandra Natalia & Fuchs Tarlovsky,Alan & Ortiz-Juarez,Eduardo & Del Carmen Hasbun,Giselle Eugenia, 2017. "The impact of fiscal policy on inequality and poverty in Chile," Policy Research Working Paper Series 7939, The World Bank.
    2. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 54, Tulane University, Department of Economics.
    3. Ali Enami, 2016. "An Application of the CEQ Effectiveness Indicators: The Case of Iran," Commitment to Equity (CEQ) Working Paper Series 58, Tulane University, Department of Economics.
    4. Nora Lustig, 2016. "Fiscal policy, inequality and the poor in the developing world," Working Papers 418, ECINEQ, Society for the Study of Economic Inequality.
    5. Shamma A. Alam & Gabriela Inchauste & Umar Serajuddin, 2017. "The Distributional Impact of Fiscal Policy in Jordan," Commitment to Equity (CEQ) Working Paper Series 44, Tulane University, Department of Economics.
    6. Stephen D. Younger & Artsvi Khachatryan, 2017. "Fiscal Incidence in Armenia," Commitment to Equity (CEQ) Working Paper Series 43, Tulane University, Department of Economics.
    7. repec:bla:rdevec:v:21:y:2017:i:4:p:e47-e66 is not listed on IDEAS

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