Confidence Intervals for the Suits Index

Abstract

The Suits Index is often used in tax policy analysis to measure the degree of progressivity of a tax, or to analyze changes in progressivity under alternative tax regimes. As a point estimator, however, the Index provides researchers with no assistance in assessing whether changes are in fact statistically significant. We present a bootstrap methodology by which researchers can estimate confidence intervals for differences in Suits Indices. We also illustrate the use of that methodology with an application for the U.S. income tax, simulating the effects of removing housing deductions.

The distributional incidence of the gasoline tax in Chile

“…One of the practical limitations in the use of the Suits Index has been the difficulty of being able to statistically test the difference between two indices or the change in value of the index when there is a tax change. However, the research of Anderson et al (2003) suggests a way to construct confidence intervals for the Suits Index using a bootstrap methodology, which eliminates this restriction. The main idea behing the bootstrap is to use the sample data, resampling with replacement, to empirically determine the distribution function for the Suits Index and then use that estimated distribution to test hypotheses.…”

The relative regressivity of seven lottery games

“…The implicit lottery tax is regressive if S 2 [À1, 0), proportional if S ¼ 0, and progressive if S 2 (0, 1], with lower Suits Indices indicating greater tax regressivity. Following Anderson et al (2003), we construct bootstrap SEs and confidence intervals for the Suits Indices of each of the seven Minnesota lottery products. We calculate the Suits Index of each Minnesota lottery product for each of 10 000 bootstrap samples of the 857 zip code observations through re-sampling the data with replacement.…”

Does the unification of health financing affect the distribution pattern of out‐of‐pocket health expenses in Turkey?

“…The value of π S ranges from −1 (when the entire financial burden falls on the poorest person) to 1 (when the entire financial burden falls on the richest person) (Wagstaff & van Doorslaer, 1992). Anderson, Roy, and Shoemaker (2003) developed an alternative formula to calculate the Suits index. It is written as follows:…”

“…Anderson, Roy, and Shoemaker () developed an alternative formula to calculate the Suits index. It is written as follows:…”