Horizontal and vertical inequality in a social welfare framework

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Facultad de Ciencias Económicas y Empresariales. Instituto Complutense de Análisis Económico (ICAE)
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In this paper a new definition of horizontal inequality is adopted. It is defined in terms of the distributional change within intervals of similar households, produced by the Tax System. We believe that this definition is better suited for measurement of the comparative injustice that may be caused by the Tax System among similar households. In particular a within-group Atkinson inequality index applied to one minus the tax rates of similar households is proposed. It enables us to introduce this concept in a general social welfare framework together with efficiency and vertical equity redistribution considerations, where the horizontal equity and vertical redistribution are income-invariant measures. It contributes to a more appropriate evaluation of the desirability of tax reforms aimed at achieving greater horizontal equity.
En este papel se define la desigualdad horizontal en términos del cambio distributivo intragrupos que el Sistema Fiscal produce en intervalos de hogares similares. Creemos que ésta es una mejor definición para evaluar los agravios comparativos del Sistema Fiscal entre hogares similares. A este respecto el Índice de Atkinson de desigualdad intragrupos de uno menos los tipos medios de los hogares similares es adecuado. Una ventaja de este índice es que nos permite la introducción de este concepto en un marco de bienestar social junto con consideraciones de eficiencia y de redistribución vertical, donde la equidad vertical y la equidad horizontal son medidas invariantes ante cambios relativos de renta. El papel contribuye a una evaluación más adecuada de la deseabilidad de las reformas fiscales con consideraciones de equidad horizontal.
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