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Partial Horizontal Inequity Orderings: A non-parametric Approach

Juan Rodríguez (), Rafael Salas () and Irene Perrote ()

No E2004/01, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: We provide a partial ordering view of horizontal inequity (henceforth HI), based on the Lorenz criterion, associated with different post-tax income distributions and a (bistochastic) nonparametric estimated benchmark distribution. As a consequence, several measures consistent with the Lorenz criterion can be rationalized. In addition, we establish the so-called horizontal inequity transfer principle, which imposes a normative minimum requirement that any HI measure must satisfy. Our proposed HI ordering is consistent with this principle. Moreover, we adopt a cardinal view to decompose the total effect of a tax system into a welfare gain due to HI-free income redistribution and a welfare loss due to HI, without any additive decomposable restriction on the indices. Hence, more robust tests can be applied. Other decompositions in the literature are seen as particular cases.

Keywords: vertical redistribution; horizontal inequity; social welfare; non-parametric estimation. (search for similar items in EconPapers)
JEL-codes: C14 D31 D63 H23 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2004
New Economics Papers: this item is included in nep-ecm and nep-pbe
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