Inference on Income Inequality and Tax Progressivity Indices: U-Statistics and Bootstrap Methods

Raquel Andres and Samuel Calonge
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Raquel Andres: Centre for the Study of Wealth and Inequality, Columbia University and Centre of Research on Welfare Economics (CREB)

No 9, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: This paper discusses asymptotic and bootstrap inference methods for a set of inequality and progressivity indices. The application of non-degenerate U-statistics theory is described, particularly through the derivation of the Suits-progressivity index distribution. We have also provided formulae for the “plug-in” estimator of the index variances, which are less onerous than the U-statistic version (this is especially relevant for those indices whose asymptotic variances contain kernels of degree 3). As far as inference issues are concerned, there are arguments in favour of applying bootstrap methods. By using an accurate database on income and taxes of the Spanish households (statistical matching EPF90-IRPF90), our results show that bootstrap methods perform better (considering their sample precision), particularly those methods yielding asymmetric CI. We also show that the bootstrap method is a useful technique for Lorenz dominance analysis. An illustration of such application has been made for the Spanish tax and welfare system. We distinguish clear dominance of cashbenefits on income redistribution. Public health and state school education also have significant redistributive effects.

Keywords: Income Inequality; Tax Progressivity; Statistical Inference; U-statistics; Bootstrap method. (search for similar items in EconPapers)
JEL-codes: C14 C15 H00 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2005-11
New Economics Papers: this item is included in nep-ecm and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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