A Normative Approach to Measuring Classical Horizontal Inequity

December 1996

29 Pages Posted: 6 Feb 1997  

Jean-Yves Duclos

Laval University; IZA Institute of Labor Economics

Peter J. Lambert

University of Oregon - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

This paper makes a new attack on the old problem of measuring horizontal inequity (HI). A local measure of HI is proposed, and aggregated into a global index. Whilst other approaches have captured the welfare gain which would come from eliminating HI revenue-neutrally, our global index provides a measure of the revenue gain per capita which would come from eliminating HI welfare-neutrally. When expressed as a fraction of mean post-tax income, the measure can be viewed as a negative component in the Blackorby and Donaldson (1984) index of tax progressivity, quantifying the loss of vertical performance arising from differences in the tax treatment of equals. Being money-metric, the measure can also be easily and intuitively interpreted. We propose non-parametric estimation procedures to obviate the important identification of equal problem. To our knowledge, this provides the first consistent statistical solution to measuring classical horizontal inequity. The method is applied to the Canadian distributions of gross and net incomes in 1981 and 1990.

JEL Classification: C14, D63, H23

Suggested Citation

Duclos, Jean-Yves and Lambert, Peter J., A Normative Approach to Measuring Classical Horizontal Inequity. December 1996. Available at SSRN: https://ssrn.com/abstract=2003 or http://dx.doi.org/10.2139/ssrn.2003

Jean-Yves Duclos (Contact Author)

Laval University ( email )

Quebec G1K 7P4
Canada
418-656-7096 (Phone)
418-656-9727 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Peter J. Lambert

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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