On the Aronson-Johnson-Lambert Decomposition of the Redistributive Effect

Universita' degli Studi di Milano Dept of Economics, Business and Statistics Working Paper No. 2007-13

23 Pages Posted: 26 Jun 2008

See all articles by Simone Pellegrino

Simone Pellegrino

Independent

Achille Vernizzi

Department of Economics, Management and Quantitative Methods, Università degli Studi di Milano

Date Written: June 26, 2007

Abstract

Recently van De Van, Creedy and Lambert (2001) and Lambert and Urban (2005) have reconsidered the original Aronson, Johnson and Lambert (1994) decomposition of the redistributive effect in order to properly evaluate personal income tax reforms, when sequential income groups do not concern exact equals. Lambert and Urban (2005) decompose the Atkinson-Plotnick-Kakwani index into three terms. We utilize this decomposition in choosing the optimal bandwidth and suggest to consider not only the highest vertical contribution to the redistributive effect, but also the horizontal inequity due to the reranking of the mean post-tax income among groups. Findings are applied to Italian data with respect to both individual nominal incomes and equivalent household incomes.

Keywords: Personal Income Tax, Redistributive Effect, Horizontal Inequity, Reranking

JEL Classification: H23, H24

Suggested Citation

Pellegrino, Simone and Vernizzi, Achille, On the Aronson-Johnson-Lambert Decomposition of the Redistributive Effect (June 26, 2007). Universita' degli Studi di Milano Dept of Economics, Business and Statistics Working Paper No. 2007-13, Available at SSRN: https://ssrn.com/abstract=1151687 or http://dx.doi.org/10.2139/ssrn.1151687

Simone Pellegrino

Independent ( email )

Achille Vernizzi (Contact Author)

Department of Economics, Management and Quantitative Methods, Università degli Studi di Milano ( email )

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