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Journal of Property Tax Assessment & Administration

Abstract

This paper aims to show how the Gini-based measures for inequality, commonly used in the socioeconomic literature, can be applied to property assessments. The index for vertical equity is the ratio of the Gini-based coefficient of assessment to the Gini coefficient of price. It is interpreted as the elasticity of shares of assessments to shares of prices when prices are ordered from the lowest to highest price levels. A second index is based on the difference, rather than the ratio, of the Gini-based coefficients. An important distinction between both indexes and the price-related differential (PRD) and currently used measures is that Gini-based analyses do not use sales ratios (assessment/price ratios), which are basically the behavior of the appraisal errors. Instead, they are based on measures that capture the cumulative distributional behavior of assessments relative to the cumulative distributional behavior of prices across ordered price levels. Both indexes are summary measures that are simple to calculate without regression, although there are regression-equivalent formulations that are used to statistically test for vertical equity. Because Gini-based measurements of inequality have a long history in economics, their introduction to property assessment aligns the measurement and interpretation of vertical equity with its application in other fields.

Keywords

Assessment performance measures MRA in assessment

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