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The Role of the Unit of Analysis in Tax Policy Return Evaluations of Inequality and Social Welfare

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  • John Creedy

    (The University of Melbourne)

  • Rosanna Scutella

    (The University of Melbourne)

Abstract

This paper examines the implications, for overall social welfare and inequality comparisons, of using different definitions of the unit of analysis in computing summary measures. The units considered are households, individuals and adult equivalent persons. Comparisons are made of the effects of flattening the marginal tax rate structure using the Melbourne Institute Tax and Transfer Simulator (MITTS), a simulation model of the Australian direct tax and benefit system. The reform was found to reduce inequality, no matter which unit of analysis was chosen. However, it was not always judged to improve social welfare, depending on the degree of inequality aversion and the unit of analysis chosen.

Suggested Citation

  • John Creedy & Rosanna Scutella, 2004. "The Role of the Unit of Analysis in Tax Policy Return Evaluations of Inequality and Social Welfare," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 89-108, March.
    • Handle: RePEc:ozl:journl:v:7:y:2004:i:1:p:89-108
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    References listed on IDEAS

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    5. John Creedy & Catherine Sleeman, 2004. "Adult Equivalence Scales, Inequality and Poverty in New Zealand," Treasury Working Paper Series 04/21, New Zealand Treasury.
    6. John Creedy & Alan S. Duncan & Mark Harris & Rosanna Scutella, 2002. "Microsimulation Modelling of Taxation and the Labour Market," Books, Edward Elgar Publishing, number 2796.
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    11. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
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    15. John Creedy & Ivan Tuckwell, 2004. "Reweighting Household Surveys for Tax Microsimulation Modelling: An Application to the New Zealand Household Economic Survey," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 71-88, March.
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    17. Glewwe, Paul, 1991. "Household equivalence scales and the measurement of inequality : Transfers from the poor to the rich could decrease inequality," Journal of Public Economics, Elsevier, vol. 44(2), pages 211-216, March.
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    Citations

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    Cited by:

    1. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    2. John Creedy & Cath Sleeman, 2005. "Adult equivalence scales, inequality and poverty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 39(1), pages 51-81.
    3. John Creedy & Guyonne Kalb, 2005. "Behavioural Microsimulation Modelling With the Melbourne Institute Tax and Transfer Simulator(MITTS) : Uses and Extensions," Department of Economics - Working Papers Series 932, The University of Melbourne.
    4. John Creedy & Jesse Eedrah, 2014. "The Role of Value Judgements in Measuring Inequality," Treasury Working Paper Series 14/13, New Zealand Treasury.
    5. Creedy, John, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Working Paper Series 18784, Victoria University of Wellington, Chair in Public Finance.
    6. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    7. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    8. John Creedy & Guyonne Kalb, 2005. "Behavioural Microsimulation Modelling for Tax Policy Analysis in Australia: Experience and Prospects," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(1), pages 73-110, March.
    9. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    10. Burlacu, Irina & O'Donoghue, Cathal, 2012. "Differential welfare state impacts for frontier working age families," MERIT Working Papers 2012-061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    12. John Creedy, 2017. "Alternative Distributions for Inequality Comparisons," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(4), pages 484-497, December.

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    More about this item

    Keywords

    Welfare and Poverty: General Welfare and Poverty: Other General Welfare; Basic Needs; Living Standards; Quality of Life;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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