In a relative deprivation framework, unless inequality is reduced, growth is associated with both higher satisfaction and higher deprivation. This may help explain the discontent with growth despite its benefits.
... See More + As is well known in the literature, knowledge of the population's mean income and Lorenz curve is all that is needed to analyze a distribution, so that this can also be used to assess the satisfaction and deprivation of each individual. Given the normalization used to derive the satisfaction and deprivation measures, satisfaction and deprivation add up to the mean income for the population as a whole as well as for each individual.
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Policy Research Working Paper WPS4921 APR 01, 2009
Using national income and expenditure distribution data from 119 countries, the authors decompose total income inequality between the individuals in the world, by continent and by "region" (countries grouped by income level).
... See More + They use a Gini decomposition that allows for an exact breakdown (without a residual term) of the overall Gini by recipients. Looking first at income inequality in income between countries is more important than inequality within countries. Africa, Latin America, and Western Europe and North America are quite homogeneous continent, with small differences between countries (so that most of the inequality on these continents is explained by inequality within countries). Next the authors divide the world into three groups: the rich G7 countries (and those with similar income levels), the less developed countries (those with per capita income less than or equal to Brazil's), and the middle-income countries (those with per capita income between Brazil's and Italy's). They find little overlap between such groups - very few people in developing countries have incomes in the range of those in the rich countries.
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Policy Research Working Paper WPS2562 MAR 31, 2001
This report analyzes the evolution of poverty and inequality in the Latin American and Caribbean region (LAC) from 1986 to 1996, with projections to 1998.
... See More + It reviews the policies which have been advocated and/or implemented to reduce poverty. And it provides a number of new research techniques. To achieve these results, the report combines: 1) the results of new empirical work using household surveys for 12 countries (Argentina, Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, Honduras, Mexico, Paraguay, Uruguay, and Republica Bolivariana de Venezuela); b) short theoretical developments; and a review of the literature on issues related to poverty, inequality, and social policy in LAC, with a focus on the poverty assessments completed by the World Bank. The first two chapters are devoted to measuring poverty and inequality. The next four chapters examine the policies that help reduce poverty. In reviewing these polices, the report follows the framework proposed in the World Development Report 2000-2001. This framework identifies three essential elements for reducing poverty: Chapters 3 and 4 look at opportunities, as provided, among others, by broad-based economic growth and investments in human capital. Chapter 5 discuses security, as provided by social protection systems and safety nets. Chapter 6 focuses on empowerment, whereby the poor are given a voice and institutions take them into consideration.
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Patterns of transition from plan to market. Martha de Melo, Cevdet Denizer, and Alan Gelb Hungary's bankruptcy experience, 1992-1993. Cheryl W.
... See More + Gray, Sabine Schlorke, and Miklos Szanyi Why and when do governments initiate public enterprise reform? Jose Edgardo Campos and Hadi Salehi Esfahani Roads, land use, and deforestation: a spatial model applied to Belize. Kenneth M. Chomitz and David A. Gray Industrial centralization in Indonesia. J. Vernon Henderson and Ari Kuncoro Guidlines on searching for a Dalton-improving tax reform: an illustration with data from Indonesia. Shlomo Yitzhaki and Jeffrey D. Lewis A new data set measuring income inequality. Klaus Deininger and Lyn Squire
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Publication 16038 SEP 30, 1996
De Melo, Martha; Denizer, Cevdet; Gelb, Alan; Gray, Cheryl W.; Schlorke, Sabine; Szanyi, Miklos; Campos, Jose Edgardo; Esfahani, Hadi Salehi; Chomitz, Kenneth M.; Gray, David A.; Henderson,J. Vernon; Kuncoro, Ari; Yitzhaki, Shlomo; Lewis, Jeffrey D.; Deininger, Klaus; Squire, Lyn
This article documents the search for a Dalton-improving tax and expenditure reform using a methodology developed by Yitzhaki and Slemrod (1991) and Mayshar and Yitzhaki (1995).
... See More + The methodology overcomes the need to define a specific social welfare function by searching instead for reforms that improve each social welfare function belonging to a wide class of functions. The authors apply the method to the energy sector of Indonesia, ignoring distributional constraints, and find that both the subsidy on kerosene and the tax on gasoline should be reduced. But taking distributional concerns into account, the present structure of energy taxes is reasonable and the country may benefit by increasing the subsidy to kerosene, taxing electricity, and reducing the gasoline tax. These conclusions are robust to changes in the relevant parameters representing the Indonesian economy.
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The effects of tax evasion on tax rates and government revenues have focused fresh attention on the question of tax administration. Because of the difficulties of measuring the consequences of good or bad administration, policymakers cannot rely on a wide range of specific information on this subject.
... See More + This paper presents a model which shows the process of auditing tax returns as a decision tree. Using this model, governments can verify that the additional power is not abused and that the administration is efficient. The main idea is to introduce economic considerations into the process of selecting and inspecting tax returns. By calculating the investment in the inspector's time at each stage (the taxpayer is likely to appeal), and the increase in revenue that would result, it is possible to calculate the minimum amount of tax evasion that justifies continuing the audit - the shadow price of the tax inspector. If the guidelines are followed the productivity of the inspectors will increase as well.
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Governments in developing countries are continuously searching for new and improved tax bases. Existing methods of taxation in these countries frequently fall short of meeting acceptable criteria of efficiency, equity and administrative ease.
... See More + This paper argues that there is a compelling fiscal rationale for encouraging greater reliance on taxing the consumption of electrical and telephone (ET) services. Greater emphasis on this selective commodity tax base would contribute to the achievement of taxpayer equity and would be administratively easy to impose. In addition, the efficiency characteristics of this form of taxation may also add to the attractiveness of the ET base.
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The paper suggests a method which enables the user to identify commodities that all individuals who can agree on certain weak assumptions with regard to the social welfare function will agree upon as worth subsidizing or taxing in the absence of efficiency considerations.
... See More + The method is based on an extension of the stochastic dominance criteria and it is illustrated using data from Israel.
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Although Egypt has been able to provide many of its citizens with cheap food, cheap oil and cheap shelter, the deficits in its budget and balance of payments may preclude government spending for these services in the future.
... See More + Consequently, the challenge before the Egyptian government is to identify and to eliminate "redundant" subsidies (i.e. those subsidies that do not improve the welfare of the poorest members of society). By better targeting the subsidies to low income groups, a reduction in the deficit can be achieved without affecting the redistributional objectives of the existing policy. The aim of this paper is to analyze the distributional impact of several subsidies to basic food items by ranking subsidies according to their effectiveness in achieving the goal of decreasing poverty. With this in mind, the report makes several conclusions. First, a reduction in subsidies to commodities that are distributed through cooperative stores can improve the performance of the system. This conclusion is not affected by choice of the welfare function that represents the preferences of the decision makers. Secondly, subsidies to commodities in the open market are not less important than subsidies to rationed commodities.
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This paper uses the extended Gini inequality index to examine the sensitivity of measurements of impacts of migrant remittances on the distribution of household income by size to different value judgements when measuring inequality.
... See More + The results illustrate the robustness of earlier findings that the impacts of migration on village income distributions differ for different types of migration and for different periods in a village's migration history. The magnitude of these impacts, however, appears to be quite sensitive to the weights attached to incomes at different points in the village income distribution. For example, in a village with considerable Mexico-to-U.S. migration experience, remittances from Mexico-to-U.S. migrants have a favorable effect on the village income distribution. However, the extended Gini analysis shows that this favorable impact decreases as more weight is attached to incomes in the poorest households. This finding is consistent with the view that barriers to high-paying Mexico-to-U.S. migration work exist for households at the bottom of the village income distribution.
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Departmental Working Paper DRD283 JAN 01, 1987
Stark, Oded; Taylor, J. Edward; Yitzhaki, ShlomoDisclosed
This paper presents a simple method for analyzing the distributional effects of marginal changes in commodity taxes. The distributional effect of a tax is measured by its impact on the Gini coefficient of the overall distribution of real income.
... See More + Then a decomposition of the Gini coefficient is carried out in a way which resembles the analysis of variance. As a result of this decomposition, non-parametric estimates of income elasticities of the Engel curves emerge. The magnitudes of these income elasticities determine the desired changes in the taxes. The method is illustrated with data from Israel.
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