Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers

By Vitor Gaspar, Paolo Mauro, Tigran Poghosyan

October 3, 2017

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Vitor Gaspar, Paolo Mauro, and Tigran Poghosyan. Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers, (USA: International Monetary Fund, 2017) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

How can a society’s well-being be measured to include not only average incomes but also their distribution? How can the effects of policies be assessed by considering both equity and efficiency? This primer outlines the seminal contributions of influential economists of the past, including Arthur Okun, who developed a simple method to elicit people’s preferences regarding redistribution, and Anthony Atkinson, who showed how equity and efficiency can be measured simultaneously and summarized in a single, intuitive index expressed in monetary units (such as dollars). These methods are applied to recent data to gauge how countries fare when both mean incomes and their distribution are considered together, and to a hypothetical tax-and-transfer scheme assessed through a general equilibrium model for household-level data.

Subject: Consumption, Foreign exchange, Income distribution, Income inequality, National accounts, Personal income, Purchasing power parity

Keywords: Africa, Consumption, Equality and efficiency, Equality component, Fiscal redistribution, Income, Income distribution, Income distribution, Income inequality, Inequality aversion, Mean income, Personal income, Purchasing power parity, Taxation model, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/214
Stock No:

WPIEA2017214
ISBN:

9781484322000
ISSN:

1018-5941

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