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Abstract
The analysis of transfer systems that include both social benefit and taxation programs is complicated by the fact that the component programs comprising those systems interact. This paper develops a mathematical framework for the analysis of such systems at the micro‐level, i.e., using an individual or family as the unit of analysis. The first section describes the importance of income transfer issues and identifies criteria for evaluating proposed methodologies. Subsequent sections address the foundations for appropriate methods from two perspectives. The first perspective examines transfer systems using elementary concepts drawn from set theory, real analysis, and welfare economics; the assumptions and theorems presented allow the derivation of relevant system properties and serve to ensure that the systems discussed are well‐defined. The second perspective concentrates on the numerical methods required to execute income transfer analyses. The final section describes an implementation of this framework and briefly discusses the associated software.
Notes
The opinions expressed in this paper are the authors’ and should not be construed as necessarily reflecting positions either of the School of Urban and Public Affairs at Carnegie Mellon University or of the Government of Canada or the Department of National Health and Welfare. Portions of the material in this article appeared originally in “The Mathematics of Stacking,” (Morrison, 1977).