Equivalence scales, horizontal equity and optimal taxation under utilitarianism

Abstract

Families of various sizes a~l share the same preference maps over consumption and leisure where consumption has been appropriately scaled to reflect those variations'. Under lump sum taxes, equating labor supplies and scaled consumptions is not the~ptimal way to achieve horizontal equity. Under an income tax structure, if there is sufficient diversity of ahility for all family sizes, the opposite is true.In particular, the marginal tax rates of the two ends of the ability scales are positive for small families and negative for large ones.

Means Testing Retirement Benefits: Fostering Equity or Discouraging Savings?

“…Expected lifetime utility of household i at age t is described by the time separable function: where γ > 0 is the intertemporal elasticity of substitution (of total expenditure), E t is the expectations operator, c i , t ∈ R + is composite nondurable consumption, l i , t ∈ [0,1] is the proportion of household time spent in leisure, and θ i , t ∈ R + is adult equivalent size based upon the McClements’ scale (McClements, 1977). This form of adjustment for household size in the utility function is discussed by Balcer and Sadka (1986) and Muellbauer and van de Ven (2004). The McClements’ scale depends upon the numbers of adults, , and children, in a household, and its inclusion in the preference relation reflects the fact that household size has been found to have an important influence on the timing of consumption, e.g.…”

A Subjective Well-being Equivalence Scale for Mexico: Estimation and Poverty and Income-distribution Implications

“…They added that, "The economic approach to the study of inequality might be caricatured as the comparison of unlike incomes among otherwise similar people. But in practice it is also about the comparison of incomes of unlike persons with unlike circumstances" (Cowell & Mercader-Pratts, 1997, p been studied by, among others, Balcer & Sadka (1986), Ebert & Moyes (1999), Glewwe (1991) and Muellbauer & van de Ven (2003).…”

Poverty and Equity

“…Recent literature surveys can be found in Jenkins and Lambert (1999), Lambert and Ramos (1997a) and Lambert (2001) (see also the comment by Plotnick (1999) and the earlier reviews of Musgrave (1990) and Plotnick (1985)). See also Balcer and Sadka (1986), Feldstein (1976), Hettich (1983), Lambert and Yitzhaki (1995) and Stiglitz (1982) for a treatment of horizontal equity as a separate principle from vertical equity, and Kaplow (1989), Kaplow (1995) and Kaplow (2000) for a critique of the principle of horizontal inequity.…”