equity

Equity is the concept or idea of fairness in economics, particularly as to taxation or welfare economics.

Overview

In welfare economics, equity may be distinguished from economic efficiency in overall evaluation of social welfare. Although 'equity' has broader uses, it may be posed as a counterpart to economic inequality in yielding a "good" distribution of welfare. It has been studied in experimental economics as inequity aversion.

In public finance horizontal equity is the idea that people with a similar ability to pay taxes should pay the same or similar amounts. It is related to the concept of tax neutrality or the idea that the tax system should not discriminate between similar things or people, or unduly distort behavior.^[1].

Vertical equity usually refers to the idea that people with a greater ability to pay taxes should pay more. However, to those that believe in a flat tax, the idea of vertical equity could mean that the rich should not be punished for their success by paying higher taxes than others. If the rich pay more in proportion to their income, this is known as a proportional tax; if they pay an increasing proportion, this is termed a progressive tax, more associated with redistribution of wealth.^[2]

In a Health Care Context

Horizontal equity means providing equal healthcare to those who are the same in a relevant respect (such as having the same 'need'). Vertical equity means treating differently those who are different in relevant respects (such as having different 'need'), (Culyer, 1995).

Health studies of equity seek to identify whether particular social groups receive systematically different levels of care than do other groups. There are many ways to identify preventable or unjust disparities, including the study of health outcomes using quintile analysis or concentration indexes.

In fair division

Equitability in fair division means that every person’s subjective valuation of their own share of some goods is the same. The surplus procedure (SP) achieves a more complex variant called proportional equitability. For more than 2 people a division cannot always both be equitable and envy-free.^[3]

Notes

References

• Anthony B. Atkinson and Joseph E. Stiglitz (1980). Lectures in Public Economics, McGraw-Hill Economics Handbook Series
• Xavier Calsamiglia and Alan Kirman (1993). "A Unique Informationally Efficient and Decentralized Mechanism with Fair Outcomes," Econometrica, 61(5) , pp. 1147-1172.
• A.J. Culyer (1995). "Need — the Idea Won’t So — but We Still Need It" Social Science and Medicine, 40, pp. 727–730.
• Jean-Yves Duclos (2008). "horizontal and vertical equity," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Allan M. Feldman (1987). "equity," The New Palgrave: A Dictionary of Economics, v. 2, pp. 182–84.
• Peter J. Hammond (1987). "altruism," The New Palgrave: A Dictionary of Economics, v. 1, pp. 85–87.
• * Julian Le Grand {1991). Equity and Choice: An Essay in Economics and Applied Philosophy. Chapter preview links.
• Richard A. Musgrave (1959). The Theory of Public Finance: A Study in Political Economy.
• _____ (1987). "public finance," The New Palgrave: A Dictionary of Economics, v. 3, pp. 1055–60.
• Richard A. Musgrave and Peggy B. Musgrave (1973). Public Finance in Theory and Practice
• Joseph E. Stiglitz (2000). Economics of the Public Sector, 3rd ed. Norton.
• William Thomson (2008). "fair allocation," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• World Bank. World Development Report 2006: Equity and Development.Summary with ch. links.
• H. Peyton Young (1994). Equity: In Theory and Practice. Princeton NJ: Princeton University Press. Contents and introduction.

See also

• Economic inequality
• Justice (economics)