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

Irene Perrote, Juan Rodríguez and Rafael Salas

No 01-07, Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales

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.

Keywords: Vertical redistribution; Horizontal inequity; Social-welfare and non-parametric estimation. (search for similar items in EconPapers)
JEL-codes: C14 D31 D63 H23 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2001
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