Horizontal Inequity and Vertical Redistribution

INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 1

Posted: 7 Jan 1997

See all articles by Peter J. Lambert

Peter J. Lambert

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

Xavier Ramos

Universitat Autònoma de Barcelona; Institute for the Study of Labor (IZA)

Abstract

Inequality of post-tax income among pre-tax equals is evaluated and aggregated to form a global index of horizontal inequity in the income tax. The vertical action of the tax is captured by its inequality effect on average between groups of pre-tax equals. Putting the two together, horizontal inequity measures loss of vertical performance. The identification problem, which has previously been thought insuperable, is addressed by a procedure validating the banding of income units into "close equals" groups. The horizontal and vertical effects of a major Spanish income tax reform are evaluated. Lines for future investigation are suggested.

JEL Classification: D63

Suggested Citation

Lambert, Peter J. and Ramos, Xavier, Horizontal Inequity and Vertical Redistribution. INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 1. Available at SSRN: https://ssrn.com/abstract=4530

Peter J. Lambert (Contact Author)

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

Xavier Ramos

Universitat Autònoma de Barcelona ( email )

Dept. Economia Aplicada
Campus UAB
Bellaterra, Barcelona 08193
Spain

Institute for the Study of Labor (IZA)

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

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