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Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers, Vitor Gaspar, Paolo Mauro, Tigran Poghosyan

How can a society’s well-being be measured to include not only average incomes but also their distribution? How can the effects of policies be assessed by considering both equity and efficiency? This primer outlines the seminal contributions of influential economists of the past, including Arthur Okun, who developed a simple method to elicit people’s preferences regarding redistribution, and Anthony Atkinson, who showed how equity and efficiency can be measured simultaneously and summarized in a single, intuitive index expressed in monetary units (such as dollars). These methods are applied to recent data to gauge how countries fare when both mean incomes and their distribution are considered together, and to a hypothetical tax-and-transfer scheme assessed through a general equilibrium model for household-level data
Table Of Contents
Cover -- Content -- I. Introduction -- II. The "Old Masters" on Assessing Equity and Efficiency -- A. Eliciting Observers' Aversion to Inequality: Okun's "Leaky Bucket" Exercise -- B. Eliciting Observers' Aversion to Inequality: Functional Forms -- C. Summarizing Society's Welfare: Equally-Distributed-Equivalent Incomes -- D. Relationship between Okun's Leaky Bucket Exercise and Atkinson's Equally- Distributed-Equivalent Income -- E. Links to Related Studies -- III. Empirical Applications -- A. Average Incomes and Distribution for a Large Panel of Countries -- B. Assessment of Policies-Example: A Tax-and-Transfer Scheme -- IV. Conclusion -- Tables -- 1. Maximum Acceptable Leakage, Inequality Aversion, and Ratio of Incomes -- 2. EDEI and Coefficient of Inequality Aversion -- 3. Equally-Distributed-Equivalent Income for Different Inequality Aversion, 2015 -- 4. Rank Reversals -- Figures -- 1. Social Welfare and Income Inequality -- 2. Equally-Distributed-Equivalent Income and Aversion to Inequality -- 3. Relationship Between the Size of the Transfer and the Coefficient of Inequality -- 4. Mean Incomes and Equally-Distributed-Equivalent Incomes (in logarithms) -- 5. Changes in Social Welfare and Its Components Over 2003-15 (in logs) -- 6. Gains in EDEI from the Introduction of UBI for Different Financing Sources -- Boxes -- 1. Income Distribution - Data from Household Surveys -- 2. Dynamic Stochastic General Equilibrium Model Used to Analyze the Potential Introduction of a Universal Basic Income -- Appendices -- A. Deriving the Social Welfare Function (SWF) -- B. Relating Atkinson's Inequality Index to Okun's Leaky Bucket -- C. Relating Okun's Leaky Bucket Exercise to Optimal Income Taxation -- Appendix Table -- 1. Comparison of Country Ranks Based on Mean Income and Social Welfare (EDEI) -- References
Literary Form
non fiction
Physical Description
1 online resource (35 pages)
Specific Material Designation
Form Of Item

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