Relative Performance, Relative Deprivation and Generalised Gini Indices of Inequality and Horizontal Inequity

Il est possible d'interpréter une classe d'indices d'iniquité horizontale comme représentant un regroupement de moyennes normatives de sentiments individuels de performance relative dans la distribution des taxes et des transferts. Un membre très connu de cette classe est l'indice d'iniquité horizontale d'Atkinson et de Plotnick. On peut interpréter de façon similaire des indices généralisés de Gini comme étant des moyennes normatives de sentiments individuels de privation relative. La combinaison de ces deux classes d'indices peut nous permettre de mieux soupeser les objectifs concurrents de réduction d'inégalité et d'équité horizontale. Les résultats portant sur l'équité horizontale sont illustrés à l'aide de la distribution des taxes et des transferts au Canada en 1981 et en 1990. Nous trouvons que les sentiments de mauvaise performance relative ainsi que l'iniquité horizontale ont augmenté de façon statistiquement significative dans les années 1980.

Economic Isolation, Inequality, and the Suits Index of Progressivity

We present a class of social evaluation functions and inequality indices that obey standard axioms of welfare economics and that can be intuitively linked to measures of relative deprivation and economic isolation. From this, associated classes of indices of tax departure from proportionality and tax redistribution are derived. A special case of these indices is the popular Suits index of progressivity, for which no social welfare foundation has previously been provided. We illustrate the application of these indices using the British regime of personal income taxes and National Insurance contributions.Progressivity, redistribution, inequality, economic isolation.

Equity and Equality

Is horizontal equity (HE) the "most widely accepted principle of equity"? Or does it stand in "opposition to the advancement of human welfare"? This paper argues that the case for the HE principle is not as straightforward as is usually thought and that it requires advanced notions of justice and well-being. The most likely ethical basis HE appears to combine a Rawlsian maximin principle and a view of well-being that allows for relative local comparison effects. The paper also explores some of the dimensions of equality and well-being along which the HE principle can be applied and presents a number of examples showing how HE considerations can provide an important input into policy analysis.Horizontal equity, vertical equity, redistribution, equality, social justice

Measuring Progressivity and Inequality

A general class of progressivity indices is proposed which is consistent with the well-developed theory of the measurement of inequality and social welfare. In particular, we show that the more progressive a tax system, the more equal the distribution of net income and the greater the progressivity index. For an additive social welfare function and a progressive tax system, the greater the degree of relative inequality aversion, the greater the progressivity index. We also discuss the link between inequality of gross income and tax progressivity. A by-product is the derivation of a general class of inequality measures that are invariant to equi-proportionate changes in incomes. We illustrate the analysis using the British tax and benefit system.Progressivity, redistribution, inequality, social welfare

Quebec's Green Future: The Lowest-Cost Route to Green Gas Reductions

The authors say Quebec’s efforts to reduce greenhouse gas (GHG) emissions must face some key facts. First, the possibilities of an effective reduction of GHG emissions through the substitution of one energy source for another are limited in Quebec. Second, Quebec’s era of low-cost hydroelectric production is finished. And third, low domestic electricity prices favour heavy usage and limit Quebec’s capacity to export clean hydroelectricity. This Backgrounder is also available in French.economic growth and innovation, greenhouse gas emissions (GHG), Quebec, carbon tax

Poverty-Decreasing Indirect Tax Reforms: Evidence from Tunisia

This paper suggests a methodology to identify socially-desirable directions for poverty-alleviating tax reforms. The cost-benefit ratio of increasing any commodity-tax rate is derived from the minimization of a poverty measure subject to a revenue requirement for the government. Further, to avoid the arbitrariness of choosing a poverty line and a poverty measure, the search for a poverty-reducing tax reform is done "robustly", among other things by increasing progressively the ethical content of a pre-defined class of poverty measures. The methodology is illustrated using data from Tunisia. The results suggest that poverty could be dropped for a large class of poverty indices and a wide range of poverty lines by raising -at constant fiscal revenue- the subsidy rate on hard wheat and mixed oils and by decreasing the one on sugar and milk.Poverty alleviation, Indirect taxation, Targeting, Tunisia

Health and Income: a Robust Comparison of Canada and the US

This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques. The paper's approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the lower bi-dimensional welfare distribution of health and income, though not generally in terms of the uni-dimensional distribution of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.Health inequality, self-reported health status, income distribution, stochastic dominance, social welfare

Linear Inequality Measures and the Redistribution of Income

A class of inequality measures that is a natural companion to the popular Lorenz curve is the class of measures that are linear in incomes. These measures, which include the Gini and S-Gini coefficients, can be interpreted as ethical means of relative deprivation feelings. Their change through the tax and benefit system can be decomposed simply as a sum of progressivity indices for individual taxes and benefits, minus an index of horizontal inequity measured by the extent of reranking in the population. These progressivity and horizontal inequity indices can also be interpreted as ethical means of perceptions of fiscal harshness and ill-performance. We furthermore derive the asymptotic sampling distribution of these classes of indices of redistribution, progressivity, and horizontal inequity, which enables their use with micro-data on a population. We illustrate the theoretical and statistical results through an application on the distribution and redistribution of income in Canada in 1981 and in 1990.

Health and Income: A Robust Comparison of Canada and the US

This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques. The paper’s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the lower bi-dimensional welfare distribution of health and income, though not generally in terms of the uni-dimensional distribution of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.health inequality, self-reported health status, income distribution, stochastic dominances, social welfare

Poverty and Inequality Components: a Micro Framework

This paper explores the link between poverty and inequality through an analysis of the poverty impact of changes in income-component inequality and in between -an within- group inequality. This can help shed light on the theoretical and empirical linkages between poverty, growth and inequality. It might also help design policies to improve both equity and welfare. The tools are illustrated using the recent 2004 Nigerian national household survey. The analytical derived linkages are supported by the empirical illustration, and interesting insights also emerge from the empirical analysis. One such insight is that both the sign and the size of the elasticities can be quite sensitive to the choice of measurement assumptions (such as the choice of inequality and poverty aversion parameters, and that of the poverty line). The elasticities are also very much distributive-sensitive and dependent on the type of inequality-changing processes taking place. This also suggests that the response of poverty to growth can also be expected to be significantly context specific.Poverty, inequality, poverty elasticities, redistribution