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Distributional Weights in Cost-Benefit Analysis—Should We Forget about Them?

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  • Olof Johansson-Stenman

Abstract

Many 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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File URL: http://le.uwpress.org/cgi/reprint/81/3/337
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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 81 (2005)
Issue (Month): 3 ()
Pages:

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Handle: RePEc:uwp:landec:v:81:y:2005:i:3:p337-352

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Web page: http://le.uwpress.org/

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Cited by:
  1. Scarborough, Helen & Bennett, Jeff, 2008. "Estimating intergenerational distribution preferences," Ecological Economics, Elsevier, vol. 66(4), pages 575-583, July.
  2. David Anthoff & Cameron Hepburn & Richard S.J. Tol, 2007. "Equity Weighting and the Marginal Damage Costs of Climate Change," Working Papers 2007.43, Fondazione Eni Enrico Mattei.
  3. Karel Martens, 2011. "Substance precedes methodology: on cost–benefit analysis and equity," Transportation, Springer, vol. 38(6), pages 959-974, November.
  4. Yamaguchi, Rintaro, 2012. "Discounting, Distribution and Disaggregation," MPRA Paper 46322, University Library of Munich, Germany.
  5. Anthoff, David & Tol, Richard S.J., 2010. "On international equity weights and national decision making on climate change," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 14-20, July.
  6. Helen Scarborough & Jeff Bennett, 2006. "Estimating Intergenerational Distribution Preferences Using Choice Modelling," Economics Series 2006_26, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  7. Adler, Matthew & Treich, Nicolas, 2014. "Consumption, Risk and Prioritarianism," TSE Working Papers 14-500, Toulouse School of Economics (TSE).
  8. Kverndokk, Snorre & Rose, Adam, 2008. "Equity and Justice in Global Warming Policy," International Review of Environmental and Resource Economics, now publishers, vol. 2(2), pages 135-176, October.
  9. Shyam KC, 2013. "Cost Benefit Studies on Disaster Risk Reduction in Developing Countries," World Bank Other Operational Studies 16111, The World Bank.
  10. Glenn Jenkins & Chun-Yan Kuo & Arnold C. Harberger, 2011. "Cost-Benefit Analysis for Investment Decisions: Chapter 14 (The Shadow Price of Government Funds, Distributional Weights, and Basic Needs Externalitiess)," Development Discussion Papers 2011-14, JDI Executive Programs.
  11. Anna Brink & Katarina Nordblom & Roger Wahlberg, 2007. "Maximum fee versus child benefit: a welfare analysis of Swedish child-care fee reform," International Tax and Public Finance, Springer, vol. 14(4), pages 457-480, August.

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