Distributional Weights in Cost-Benefit Analysis—Should We Forget about Them?
AbstractMany argue that it is socially inefficient to use distributional weights in cost-benefit analysis, and that doing so implies large inefficiency losses,when distributional matters can be dealt with trough income taxation, instead. Our results question this view, by showing a large range of cases when distributional weights are (second-best) optimal to use. One example is when different provided goods affect tax-revenues equally per dollar spent; utility functions that are separable in the provided goods is sufficient for this. Most results hold for linear and non-linear income taxes and whether they are optimal or not. General policy implications are discussed.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 81 (2005)
Issue (Month): 3 ()
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- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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