The Role of the Unit of Analysis in Tax Policy Return Evaluations of Inequality and Social Welfare

John Creedy and Rosanna Scutella

Australian Journal of Labour Economics (AJLE), 2004, vol. 7, issue 1, 89-108

Abstract: This paper examines the implications, for overall social welfare and inequality comparisons, of using different definitions of the unit of analysis in computing summary measures. The units considered are households, individuals and adult equivalent persons. Comparisons are made of the effects of flattening the marginal tax rate structure using the Melbourne Institute Tax and Transfer Simulator (MITTS), a simulation model of the Australian direct tax and benefit system. The reform was found to reduce inequality, no matter which unit of analysis was chosen. However, it was not always judged to improve social welfare, depending on the degree of inequality aversion and the unit of analysis chosen.

Keywords: Welfare and Poverty: General Welfare and Poverty: Other General Welfare; Basic Needs; Living Standards; Quality of Life (search for similar items in EconPapers)
JEL-codes: I30 I31 I39 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ozl:journl:v:7:y:2004:i:1:p:89-108

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