J. Richard Aronson

Inequality decomposition analysis and the Gini coefficient revisited

The Gini coefficient has long been thought unsuitable for inequality decomposition analysis because of a troublesome and little-understood residual term that occurs when subgroup income ranges overlap after the between-groups and within-groups contributions to inequality have been separated out. In this paper, graphical analysis is used to provide a solid understanding of the residual term as a subarea of the Lorenz diagram. Implications for inequality decomposition analysis are considered. Copyright 1993 by Royal Economic Society.

Duplicating Moody's Municipal Credit Ratings:

In this article we have shown that it is possible to duplicate with fairly high accuracy the credit ratings recently published in Moodys Analytical Overview of 25 Leading U.S. Cities. Using multiple discriminant analysis and a set of nine discriminating variables, we can predict the distribution of cities among five credit rating categories with 83% accuracy and among two aggregated cate gorres with 95% accuracy. Our accuracy rate is much higher than that of pre vious studies in this field. However, we wish to offer a note of caution in re porting our results. The sample we worked with was relatively small. We used it because it seemed to us that the publication of Moodys Analytical Overview provided a unique set of comparable intercity financial data and therefore a new opportunity to attempt a duplication of their ratings. We are pleased with the predictive accuracy we achieve but feel that before we can be sure that our techniques are reliable, future research using a larger sample and perhaps a greater number of variables is needed.

Estimates of the Changing Equity Characteristics of the U.S. Income Tax with International Conjectures

This article provides empirical estimates of the redistributive impact of U.S. personal income tax over the period 1979-1990. The estimates are based on tax return data compiled from the Ernst and Young/University of Michigan tax research database. The authors employ the Gini coefficient decomposition methodology of Lambert and Aronson to distinguish between the vertical, horizontal, and reranking effects of the tax. The authors show growing pre- and posttax income inequality for the United States over the study period. But the data also suggest that the amount of horizontal inequity associated with the U.S. personal income tax is relatively low. This article also contains some international comparisons. The redistribution associated with income taxes in the United Kingdom and Spain has been measured with the same methodology the authors employ. These two countries are also characterized by growing pre- and posttax inequality, although the level of inequality is less there than in the United States. A final interesting point of comparison, however, is that the amount of horizontal inequity associated with the tax appears less than either in the United Kingdom or Spain.

Tax Reform Then and Now

The U.S. tax structure has been reformed and simplified many times in the last 30 years but the need for reform and simplification remains greater than ever. (For a detailed summary of recent tax acts see C.E. Steuerle, 1992, 2004). Should the tax structure be built on a foundation of comprehensive income or on comprehensive consumption? (Examples of excellent tax reform analysis are Bradford, 1984 and Aaron and Gale, 1996.) Should wealth transfer taxes be inheritance taxes, estate taxes or repealed entirely? Should payroll taxes apply to all earned income or should the tax base be capped? These are all tax issues upon which reasonable people can differ. Unanimity of thought is not expected. But there is at least one area of tax reform upon which even those of opposing economic philosophies can agree.

Efficiency and Equity in Education

In education as elsewhere state dominance represses intellectual enquiry. In Britain the new secretary of state for education is the first politician to stimulate discussion of parental choice through the voucher system. American Professors Aronson and Hilley show how it could work in the USA.

Discussion of the papers

This section presents the formal reactions of selected discussants to certain of the papers already presented in this volume. Each discussant was chosen for his expertise in the field of inquiry covered by the respective papers. Jay Anderson and Joel Darmstadter discuss the papers by Kranzberg and Gerber. David Amidon and Simon Rottenberg comment on the contributions of Goldman and Day. Barry Chiswick and Richard Easterlin discuss the papers presented by Thurow and Singer.

A dialogue on the issues

The following dialogue is taken from the television program entitled “The Economic Growth Controversy,” produced in conjunction with the Lehigh Symposium by the Lehigh Valley Educational Television Corporation, WLVT-TV, an affiliate of the National Education Television Network.