Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers

35 Pages Posted: 25 Oct 2017

See all articles by Vitor Gaspar

Vitor Gaspar

European Commission

Paolo Mauro

International Monetary Fund (IMF)

Tigran Poghosyan

International Monetary Fund (IMF)

Date Written: October 2017

Abstract

How can a society's well-being be measured to include not only average incomes but alsotheir distribution? How can the effects of policies be assessed by considering both equity andefficiency? This primer outlines the seminal contributions of influential economists of thepast, including Arthur Okun, who developed a simple method to elicit people's preferencesregarding redistribution, and Anthony Atkinson, who showed how equity and efficiency canbe measured simultaneously and summarized in a single, intuitive index expressed inmonetary units (such as dollars). These methods are applied to recent data to gauge howcountries fare when both mean incomes and their distribution are considered together, and toa hypothetical tax-and-transfer scheme assessed through a general equilibrium model forhousehold-level data.

Keywords: equality and efficiency, fiscal redistribution, General, Externalities

JEL Classification: I30, D62, H20

Suggested Citation

Gaspar, Vitor and Mauro, Paolo and Poghosyan, Tigran, Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers (October 2017). IMF Working Paper No. 17/214. Available at SSRN: https://ssrn.com/abstract=3058599

Vitor Gaspar (Contact Author)

European Commission ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7200 (Phone)
+49 69 1344 6575 (Fax)

Paolo Mauro

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Tigran Poghosyan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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