A Normative and Statistical Approach to Measuring Classical Horizontal Inequity
34 Pages Posted: 12 Jul 1999
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A Normative and Statistical Approach to Measuring Classical Horizontal Inequity
A Normative and Statistical Approach to Measuring Classical Horizontal Inequity
Date Written: February 1999
Abstract
A local measure of classical horizontal inequity (HI) in an income tax or tax-benefit system is proposed and aggregated into a global index. This index expresses the revenue gain per capita that would come from eliminating HI welfare-neutrally, and also reveals the loss of vertical performance, in terms of the Blackorby and Donaldson (1984) progressivity index, caused by the presence of HI. Non-parametric estimation procedures are delineated which can be used to tackle the 'identification problem'. An application to the Canadian tax-benefit system between 1981 and 1994 reveals the changing profile of local HI, its sources and its aggregate significance.
JEL Classification: C14, D31, D63, H23
Suggested Citation: Suggested Citation
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