Skip to main content

Structural progression measures for dual income tax systems


We extend the measurement of structural progression to a pure-form dual income tax (DIT), which combines progressive taxation of labour income with proportional taxation of income from capital at a lower rate. Further, we examine the effect of the DIT’s structural progression on the responsiveness of aggregate revenue to income growth, and we demonstrate how progression measures can aid in redistributive analysis, using Nordic data to highlight problems which can stem from pre-tax distributional changes. We conclude with an assessment of the new theoretical and empirical work that is now called for.

This is a preview of subscription content, access via your institution.


  1. 1.

    Aronson, J.R., Johnson, P., Lambert, P.J.: Redistributive effect and unequalincome tax treatment. Econ. J. 104, 262–270 (1994)

    Article  Google Scholar 

  2. 2.

    Atkinson, A.B.: Afterword: equity and equality. Oxonomics 4, 41 (2009)

    Google Scholar 

  3. 3.

    Atkinson, A.B., Piketty, T.: Top Incomes: A Global Perspective. Oxford University Press, Oxford and New York (2010)

  4. 4.

    Bø, E.E., Lambert, P.J., Thoresen, T.O.: Horizontal equity under a dual income tax system: principles and measurement. Int. Tax Public Financ. 19, 625–640 (2012)

    Article  Google Scholar 

  5. 5.

    Calonge, S., Tejada, O.: A differential redistributive analysis of bilinear tax reforms. Finanz-Archiv/Public Finance Analysis 67, 193–224 (2011)

  6. 6.

    Dardanoni, V., Lambert, P.J.: Progressivity comparisons. J. Public Econ. 86, 99–122 (2002)

    Article  Google Scholar 

  7. 7.

    Ebert, U., Lambert, P.J.: Combined income taxes and tax-benefit systems. Econ. Rec. 75, 397–404 (1999)

    Article  Google Scholar 

  8. 8.

    Ebert, U., Lambert, P.J.: Horizontal equity and progression when equivalence scales are not constant. Public Finance. Rev. 32, 426–440 (2004)

    Article  Google Scholar 

  9. 9.

    Genser, B., Reutter, A.: Mowing towards dual income taxation in Europe. FinanzArchiv/Public Finance Analysis 63, 436–456 (2007)

    Article  Google Scholar 

  10. 10.

    Griffith, R., Hines, J., Sørensen, P.B.: International capital taxation. In: Mirrlees, J., Adam, J., Besley, S., Blundell, T., Bond, R., Chote, S., Gammie, R., Johnson, M., Myles, P., Poterba, G. J. (eds.) Dimensions of Tax Design: The Mirrlees Review, pp. 914–996. Institute of Fiscal Studies and Oxford University Press, London (2010)

    Google Scholar 

  11. 11.

    Hayes, K., Lambert, P.J., Slottje, D.J.: Evaluating effective income tax progression. J. Public Econ. 56, 461–474 (1995)

    Article  Google Scholar 

  12. 12.

    Hemming, R.: Income tax progressivity and labour supply. J. Public Econ. 14 (1980)

  13. 13.

    Hemming, R., Keen, M.J.: Single crossing conditions in comparisons of tax progressivity. J. Public Econ. 20, 373–380 (1983)

    Article  Google Scholar 

  14. 14.

    Hutton, J.P., Lambert, P.J.: Income tax progressivity and revenue growth. Econ. Lett. 3, 377–380 (1979)

    Article  Google Scholar 

  15. 15.

    Jakobsson, U.: On the measurement of the degree of progression. J. Public Econ. 5, 161–168 (1976)

    Article  Google Scholar 

  16. 16.

    Kakwani, N.C.: Applications of Lorenz curves in economic analysis. Econometrica 45, 719–727 (1977)

    Article  Google Scholar 

  17. 17.

    Kakwani, N.C.: On the measurement of tax progressivity and redistributive effect of taxes with applications to horizontal and vertical equity. Advances in Econometrics 3, 149–168 (1984)

    Google Scholar 

  18. 18.

    Keen, M., Papapanagos, H., Shorrocks, A.F.: Progressivity effects of structural income tax reforms. Econ. J. 110, 50–68 (2000)

    Article  Google Scholar 

  19. 19.

    Kristjánsson, A.S.: Redistributive effects of taxation in a dual income tax system. Finanzarchiv/Public Financ. Anal. 69, 148–166 (2013)

    Article  Google Scholar 

  20. 20.

    Laborda, J.L: Capital gains taxation and progressivity. Working Paper No. 1/06. Instituto de Estudios Fiscales, Madrid (2006)

    Google Scholar 

  21. 21.

    Lambert, P.J.: Non-equiproportionate income growth, inequality and the income tax. Public Finance/Finances Publiques 39, 104–118 (1984)

    Google Scholar 

  22. 22.

    Lambert, P.J., 1st ed.: The distribution and redistribution of income: A mathematical analysis. Basil Blackwell, Oxford (1989)

    Google Scholar 

  23. 23.

    Lambert, P.J., Pfähler, W.: Income tax progression and redistributive effect: the influence of changes in pre-tax income distribution. Public Finance/Finances Publiques 47, 1–16 (1992)

    Google Scholar 

  24. 24.

    Lambert, P.J., Thoresen, T.O.: The inequality effects of a dual income tax system. The B.E. J. Econ. Anal. Policy 12(1) (2012). doi:10.1515/1935-1682.29

  25. 25.

    Musgrave, R.A., Miller, M.H.: Built-in flexibility. Am. Econ. Rev. 38, 122–128 (1948)

    Google Scholar 

  26. 26.

    Musgrave, R.A., Thin, T.: Income tax progression. J. Polit. Econ. 56, 498–514 (1948)

    Article  Google Scholar 

  27. 27.

    Nielsen, S.B., Sørensen, P.B.: On the optimality of the Nordic system of dual income taxation. J. Polit. Econ. 63, 311–329 (1997)

    Google Scholar 

  28. 28.

    OECD: Divided We Stand: Why Inequality Keeps Rising. OECD Publishing (2011)

  29. 29.

    Owen, J.: Fundamental tax reform: an international perspective. Nat. Tax J. 59, 131–164 (2006)

    Google Scholar 

  30. 30.

    Pearse, P.H.: Automatic stabilization and the British taxes on income. Review of Econ. Stud. 29, 124–139 (1962)

    Article  Google Scholar 

  31. 31.

    Pfähler, W.: Linear income tax cuts: distributional effects, social preferences and revenue elasticities. J. Public Econ. 24, 381–388 (1984)

    Article  Google Scholar 

  32. 32.

    Pirttilä, J., Selin, H.: Income shifting within a dual income tax system: evidence from the Finnish tax reform of 1993. Scand. J. Econ. 113, 120–144 (2011)

    Article  Google Scholar 

  33. 33.

    Sandmo, A.: Progressive taxation, redistribution and labour supply. Scand. J. Econ. 85, 311–323 (1983)

    Article  Google Scholar 

  34. 34.

    Slitor, R.E.: The measurement of progressivity and built-in flexibility. Q. J. Econ. 62, 309–313 (1948)

    Article  Google Scholar 

  35. 35.

    Sørensen, P.B.: From the global income tax to the dual income tax: recent tax reforms in the Nordic countries. International Tax and Public Finance 1, 57–79 (1994)

    Article  Google Scholar 

  36. 36.

    Sørensen, P.B. (ed.) Tax Policy in the Nordic Countries. Palgrave Macmillan, Basingstoke (1998)

  37. 37.

    Sørensen, P.B.: Neutral taxation and shareholder income. International Tax and Public Finance 12, 777–801 (2005)

    Article  Google Scholar 

  38. 38.

    Thoresen, T.O., Alstadsæter, A.: Shifts in organizational form under a dual income tax system. FinanzArchiv/Public Finance Analysis 66, 384–418 (2010)

    Article  Google Scholar 

Download references

Author information



Corresponding author

Correspondence to Peter J. Lambert.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Kristjánsson, A.S., Lambert, P.J. Structural progression measures for dual income tax systems. J Econ Inequal 13, 1–15 (2015).

Download citation


  • Dual income tax
  • Personal income tax
  • Structural progression

JEL Classification

  • D31
  • D63
  • H23