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Book part
Publication date: 6 July 2007

Daniel L. Millimet, Daniel Slottje and Peter J. Lambert

Supposing that decisionmakers in any country and at any point in time tolerate a certain fixed level of perceived poverty, differences in poverty aversion are called for to…

Abstract

Supposing that decisionmakers in any country and at any point in time tolerate a certain fixed level of perceived poverty, differences in poverty aversion are called for to explain observed international and intertemporal variations in poverty statistics. Under the Natural Rate of Subjective Poverty hypothesis advanced in this paper, variations in the degree of poverty aversion are estimable and can be explained by political and socioeconomic factors. The methodology is applied to US data from 1975 to 1998 and across nations using cross-section data from the mid-1990s. Factors such as the political affiliation of government officials, public expenditure, per capita income, and economic growth account for much of the variation in poverty aversion implied by our hypothesis. The relationship between inequality aversion and poverty aversion is also explored, with the aid of a parallel “natural rate” hypothesis for inequality (Lambert et al., 2003). Our findings provide a new framework in which to interpret observed correlations between poverty, inequality, and social welfare.

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

Book part
Publication date: 6 July 2007

Peter J. Lambert

For equity, societies may wish to eliminate certain forms or manifestations of inequality. Horizontal equity and vertical equity in the income tax are topics which have interested…

Abstract

For equity, societies may wish to eliminate certain forms or manifestations of inequality. Horizontal equity and vertical equity in the income tax are topics which have interested me for some years. Although any shortfall from each of these objectives can be measured in terms of unwanted inequalities, equity per se is a different concept from equality. Equity relates to fairness, justice and other societal norms which give expression to the best aspirations of our collective social conscience. For example, equal access to health care for those in equal need is an accepted norm for horizontal equity in the health field. Vertical equity in this context means treating appropriately differently those who have different needs. When offered the opportunity to be Guest Editor of this volume of Research on Economic Inequality, I decided to define the focus simply as “equity”, without placing any further restriction on topics. The papers which were ultimately included in this volume are the ones, from among those offered, which survived a rigorous refereeing process. Each has its own “take” on the concept of equity, and its link with equality. I hope that you, the reader, will gain from reading all of these contributions and pondering their significance.

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

Book part
Publication date: 20 May 2003

Xavier Ramos and Peter J. Lambert

Some personal income tax breaks reward socially approved activities, others serve the interests of tax administrators and special interest groups. All give rise to classical HI…

Abstract

Some personal income tax breaks reward socially approved activities, others serve the interests of tax administrators and special interest groups. All give rise to classical HI. We allow for the categorization of tax breaks into deserving and undeserving types, and pose a “modified HE” requirement which legitimizes the former. Deserving breaks result in a loss of VE, non-deserving ones in (modified) HI. The equity cost of each tax break can be assessed. For the U.S. personal income tax, modified HI is potentially a lot smaller than classical HI: e.g. the charitable giving tax break alone in 1990 accounted for 44% of classical HI.

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Fiscal Policy, Inequality and Welfare
Type: Book
ISBN: 978-1-84950-212-2

Book part
Publication date: 6 July 2007

Paul D. Thistle

For over 60 years, Lerner's (1944) probabilistic approach to the welfare evaluation of income distributions has aroused controversy. Lerner's famous theorem is that, under…

Abstract

For over 60 years, Lerner's (1944) probabilistic approach to the welfare evaluation of income distributions has aroused controversy. Lerner's famous theorem is that, under ignorance regarding who has which utility function, the optimal distribution of income is completely equal. However, Lerner's probabilistic approach can only be applied to compare distributions with equal means when the number of possible utility functions equals the number of individuals in the population. Lerner's most controversial assumption that each assignment of utility functions to individuals is equally likely. This paper generalizes Lerner's probabilistic approach to the welfare analysis of income distributions by weakening the restrictions of utilitarian welfare, equal means, equal numbers, and equal probabilities and a homogeneous population. We show there is a tradeoff between invariance (measurability and comparability) and the information about the assignment of utility functions to individuals required to evaluate expected social welfare.

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

Article
Publication date: 1 January 1988

Peter J. Lambert

In Okun's (1975) extended essay “Equality and Efficiency — The Big Trade‐Off”, reference is made to the leaky bucket experiment in the context of tax and transfer programmes…

Abstract

In Okun's (1975) extended essay “Equality and Efficiency — The Big Trade‐Off”, reference is made to the leaky bucket experiment in the context of tax and transfer programmes. Money is carried from the rich to the poor in a bucket which leaks. This idea gives eloquent expression to the concept of efficiency loss in the use of the fiscal system to reduce inequality.

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Journal of Economic Studies, vol. 15 no. 1
Type: Research Article
ISSN: 0144-3585

Content available
Book part
Publication date: 6 July 2007

Abstract

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

Book part
Publication date: 6 July 2007

James B. Davies and Michael Hoy

We adopt a standard distributional impact methodology, based on Atkinson's cost of inequality approach, to estimate the degree of implicit redistribution created through public…

Abstract

We adopt a standard distributional impact methodology, based on Atkinson's cost of inequality approach, to estimate the degree of implicit redistribution created through public funding of health insurance in Canada. The first stage of the exercise is to determine the public health insurance benefits received by families of various age and composition and to add these to measured after-tax incomes. In our base case, which uses the Atkinson Mean Logarithmic Deviation as inequality index, we find that accounting for public health insurance benefits implies a reduction in inequality equivalent to 2.4% of per capita income. We then model the implications of moving to a hypothetical fully privatized system while proportionately refunding to individuals the tax revenues saved in doing so. This would give rise to a further 2.4% equivalent per capita income reduction resulting from increased inequality in the distribution of after-tax income. Thus, for this scenario, moving from public financing of health insurance in Canada to a fully privatized system implies an overall increase in inequality equivalent to a loss of 4.8% of per capita income. This corresponds to an increase of about 25% in existing inequality. Not surprisingly, the impact of publicly financed health insurance in reducing inequality is strongest for the elderly.

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

Article
Publication date: 1 January 1985

PETER J. LAMBERT

In this paper we describe and explore a simple macroeconomy with a progressive income tax and with both ad valorem and unit taxes on commodities. Despite the prevalence of such…

Abstract

In this paper we describe and explore a simple macroeconomy with a progressive income tax and with both ad valorem and unit taxes on commodities. Despite the prevalence of such taxes in real‐world economies, in most theoretical macroeconomic models, both static and dynamic, direct taxes are linear on the various sources of income. The indirect taxes, if any, are all proportional. It seems important in an inflationary world to make explicit the effects of both elastic and ‘sticky’ revenue sources on the government's financing problem and in particular to investigate the sort of steady states that may be achieved in such economies.

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Studies in Economics and Finance, vol. 9 no. 1
Type: Research Article
ISSN: 1086-7376

Book part
Publication date: 23 August 2012

B. Essama-Nssah and Peter J. Lambert

Social evaluation functions used in policy impact analysis can be viewed as real-valued functionals of the underlying outcome distributions. Influence functions may be used to…

Abstract

Social evaluation functions used in policy impact analysis can be viewed as real-valued functionals of the underlying outcome distributions. Influence functions may be used to identify the sources of variation in social outcomes in terms of individual or household characteristics. This chapter sets forth in clear terms the definition of the influence function and recentered influence function, and catalogs these functions for a wide range of distributional statistics, including measures of central tendency, inequality, and poverty and also measures of the degree of pro-poorness of a shock- or policy-induced change in income levels.

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Inequality, Mobility and Segregation: Essays in Honor of Jacques Silber
Type: Book
ISBN: 978-1-78190-171-7

Book part
Publication date: 6 July 2007

Alexander W. Cappelen and Bertil Tungodden

A fundamental ethical question is how a redistributive system should reward individual effort. Marginal productivity reward has been justified either as a way of ensuring…

Abstract

A fundamental ethical question is how a redistributive system should reward individual effort. Marginal productivity reward has been justified either as a way of ensuring efficiency or as a way of respecting people's self-ownership. Both these arguments have their limitations. We show that marginal productivity reward is implied by one intuitively appealing requirement on the reward structure, which we name non-negative reward. This result can be interpreted in one of two ways. It can be seen as a new justification of marginal productivity reward that avoids the limitations of the traditional arguments. Alternatively, it can be seen as a result showing that any redistributive system that makes transfers conditional on effort, sometimes will make the reward individuals get for their additional effort completely conditional on others effort. Finally, we also show that no genuine redistributive system satisfies both non-negative reward and the liberal requirement of no forced labour.

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Equity
Type: Book
ISBN: 978-0-7623-1450-8

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