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Equity (economics) |
Equity is the concept or idea of fairness in economics, particularly as to taxation or welfare economics.
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 is the idea that people with a greater ability to pay taxes should pay more. If they pay more strictly 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.2
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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 to other groups. They do this by making use of the "equity gauge".
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
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