Advances and Applications in Statistics
Volume 20, Issue 2, Pages 133 - 141
(February 2011)
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DISCONTINUOUS TRANSFER POLICIES WITH A GIVEN LORENZ CURVE
Johan Fellman
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Abstract: Let X be the pre- and Y be the post-transfer income. In earlier studies we have considered the class of transfer policies where
?is the post- transfer income and
?is non-negative, monotone increasing and continuous. In this study, we modify this class, allowing
?to be discontinuous. If
?is discontinuous, then it can have only a countable number of finite positive steps. If there exists an optimal policy which Lorenz dominates all policies in the class, then it must be continuous. We present necessary and sufficient conditions under which a given Lorenz curve
?can be generated by a member of the class. These conditions are equivalent to the condition that the transformed variable stochastically dominates the initial variable. |
Keywords and phrases: Gini index, income distribution, income inequality, stochastic dominance, taxation. |
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