 The Redistributive Effect of Taxation RevisitedJohn Creedy, P.J. Lambert and Justin van de Ven No 657, Department of Economics - Working Papers Series from The University of Melbourne Abstract: This paper suggest that the decomposition of the redistributive effect of taxation into vertical, horizontal, and re-ranking components is best achieved in terms of the welfare premium from progression, using hte abbreviated social welfare function defined in terms of the Gini measure of inequality. This contrasts with the decomposition given in Aronson et al. (1994) in which the estimate of the horizontal effect is shown here to be contaminated. Estimation of the horizontal effect for small sample populations is achieved by using near-equals to proxy exact-equals, where groups of near-equals are defined using a band-width of pre-tax incomes, following Aronson et al. (1994). It is shown that the horizontal effect is best estimated by selecting a band-width to maximise the estimated vertical effect. The estimate of the horizontal effect is then obtained by subtraction, having computed the re-ranking component exactly as a sample statistic. Keywords: FISCAL; POLICY (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:657 Access Statistics for this paper More papers in Department of Economics - Working Papers Series from The University of Melbourne Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia. Contact information at EDIRC. |
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