Transfer and Distribution Approximation
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Pigou–Dalton transfers carry over to complex income distributions under convergence in distribution and, thus, make these complex distributions comparable. While finite sequences of Pigou–Dalton transfers amount to majorization, convergence results extend these to the convex stochastic order for distributions with equal means. Thus, the larger of any two such distributions can be decreased to the smaller by Pigou–Dalton transfers and a limiting process. Alternatively, the same result can be obtained by probabilistic, more comprehensive Pigou–Dalton transfers, allowing a simpler approximation.
Also, absolute and progressive taxation are shown to decrease in the Lorenz order any Lorenz curve of a finite income distribution.
KeywordsTaxation Rate Lorenz Curve Support Point Discontinuity Point Natural Vector
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