Tax Reform and Welfare Measurement

Do We Need Demand System Estimation

Dados Bibliográficos

ID9718151
AutoresJames Banks (0000-0002-9726-8921, Institute for Fiscal Studies), Richard Blundell (0000-0003-1588-2299, UCL Australia), Arthur Lewbel (0000-0003-3864-2618, Institute for Fiscal Studies)
Ano1996
Volume106
Fascículo438
Páginas1227
Data de publicação1996-09-01
Peer ReviewedSim
Open AccessNão
TipoARTICLE
PeriódicoThe Economic Journal (JOURNAL)
Identificadores do periódicoISSN: 0013-0133 • E-ISSN: 1468-0297
EditoraOxford University Press (OUP) (PUBLISHER)
DOI10.2307/2235517
OpenAlexW3021225169
IdiomaEN
Citações recebidas10

The exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences. Typically, first order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects. We drive second order approximations which, unlike first order approximations, require knowledge of the distribution of substitution elasticities. This paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform. In our empirical examples first order approximations display systematic biases; second order approximations always work well

Deadweight loss · Distribution (mathematics · Econometrics · Economics · Empirical measure · Estimation · Measure (data warehouse · Microeconomics · Order (exchange · Public economics · Simple (philosophy · Statistics · Substitution (logic · Tax reform · Welfare · Work (physics · Computer Science · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Mathematics · Politics, Economics, and Education Policy