Weighting with individuals, equivalent individuals, or not weighting at all. Does it matter empirically?
To take into account heterogeneity in a social welfare function, Ebert (1997) and Shorrocks (1995) show that the only consistent way of welfare measurement consists of either constructing an artificial distribution in which each household is weighted by the number of equivalent individuals, or weighting by the number of individuals in the household. Both approaches are not only mutually exclusive on axiomatic grounds, they are also in sharp contrast with many empirical applications where there is no weighting at all. Since ultimately, the choice is a normative one between axioms, and hence not easily envisaged, an empirical test of the sensitivity of welfare evaluations for the choice of the different weighting schemes might prove useful. In this paper we apply the different methods to administrative microdata of the 2000 PIT reform in Belgium, obtained from the microsimulation model SIRe of the Belgian Ministery of Finance. We find indeed sensitivity of our results with respect to the different weighting methods. In addition, using the number of equivalent individuals as weights to perform dominance analysis leads to fanciful results with respect to the choice of equivalence scales.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +32-(0)16-32 67 25
Fax: +32-(0)16-32 67 96
Web page: http://www.econ.kuleuven.ac.be/ew/academic/econover/default.htmEmail:
More information through EDIRC
|Order Information:|| Email: |
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.:
- John Bishop & K. Chow & John Formby & Chih-Chin Ho, 1997. "Did Tax Reform Reduce Actual US Progressivity? Evidence from the Taxpayer Compliance Measurement Program," International Tax and Public Finance, Springer, vol. 4(2), pages 177-197, May.
- Ebert U., 1996.
"Income inequality and differences in household size,"
Mathematical Social Sciences,
Elsevier, vol. 31(1), pages 57-58, February.
- Ebert, Udo, 1995. "Income inequality and differences in household size," Mathematical Social Sciences, Elsevier, vol. 30(1), pages 37-55, August.
- Burkhauser, Richard V & Smeeding, Timothy M & Merz, Joachim, 1996.
"Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales,"
Review of Income and Wealth,
International Association for Research in Income and Wealth, vol. 42(4), pages 381-400, December.
- Richard V. Burkhauser & Timothy M. Smeeding & Joachim Merz, 1994. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," FFB-Discussionpaper 12, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
- Burkhauser, Richard V. & Smeeding, Timothy M. & Merz, Joachim, 1994. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," MPRA Paper 16295, University Library of Munich, Germany.
- Burkhauser, Richard V. & Smeeding, Timothy M. & Merz, Joachim, 1994. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," MPRA Paper 7229, University Library of Munich, Germany.
- Ebert, Udo, 1997. "Social Welfare When Needs Differ: An Axiomatic Approach," Economica, London School of Economics and Political Science, vol. 64(254), pages 233-44, May.
- Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
- Howes, Stephen, 1996. "The Influence of Aggregation on the Ordering of Distributions," Economica, London School of Economics and Political Science, vol. 63(250), pages 253-72, May.
- DONALDSON, David & WEYMARK, John A., .
"Ethically flexible Gini indices for income distributions in the continuum,"
CORE Discussion Papers RP
-520, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Donaldson, David & Weymark, John A., 1983. "Ethically flexible gini indices for income distributions in the continuum," Journal of Economic Theory, Elsevier, vol. 29(2), pages 353-358, April.
- Glewwe, Paul, 1991. "Household equivalence scales and the measurement of inequality : Transfers from the poor to the rich could decrease inequality," Journal of Public Economics, Elsevier, vol. 44(2), pages 211-216, March.
- Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
- Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
- Udo Ebert, 1999. "Using equivalent income of equivalent adults to rank income distributions," Social Choice and Welfare, Springer, vol. 16(2), pages 233-258.
When requesting a correction, please mention this item's handle: RePEc:wpe:papers:ces0215. 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: (Kristof Bosmans)
If references are entirely missing, you can add them using this form.