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A non-parametric decomposition of redistribution into vertical and horizontal components

Author

Listed:
  • Irene Perrote Coste

    (Universidad Europea de Madrid)

  • Juan Gabriel Rodríguez Hernández

    (Universidad Rey Juan Carlos)

  • Rafael Salas del Marmol

    () (Departamento de Fundamentos del Análisis Económico I (Análisis Económico). Universidad Complutense de Madrid.)

Abstract

We use non-parametric methods to propose horizontal inequity (HI) measures that satisfy certain normative and statistical properties. The HI measures tackle the problem of arbitrary definition of similar individuals and satisfy the horizontal transfer principle. HI is measured by any index consistent with the distance between the estimated and actual post-tax income Lorenz curves. This incorporates an ordinal view of HI. The total effect of a tax system can be decomposed into welfare gain due to income redistribution free of HI and welfare loss due to HI. Other indices in the literature can be seen as particular cases.

Suggested Citation

  • Irene Perrote Coste & Juan Gabriel Rodríguez Hernández & Rafael Salas del Marmol, 2001. "A non-parametric decomposition of redistribution into vertical and horizontal components," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 01-07, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
  • Handle: RePEc:ucm:doctra:01-07
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Jenkins, Stephen P., 1988. "Empirical measurement of horizontal inequity," Journal of Public Economics, Elsevier, vol. 37(3), pages 305-329, December.
    4. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
    5. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
    6. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    7. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, vol. 104(423), pages 262-270, March.
    8. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
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    Cited by:

    1. César Octavio Vargas Téllez, 2009. "Veinte años de estancamiento en la distribución del ingreso de las familias Mexicanas. Un enfoque de microdatos," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 81-107, May.

    More about this item

    Keywords

    Vertical redistribution; Horizontal inequity; Social-welfare and non-parametric estimation.;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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