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Public Safety under Imperfect Taxation

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  • Treich, Nicolas
  • Yang, Yuting

Abstract

Standard benefit-cost analysis often ignores distortions caused by taxation and the heterogeneity of taxpayers. In this paper, we theoretically and numerically explore the effect of imperfect taxation on the public provision of mortality risk reductions (or public safety). We show that this effect critically depends on the source of imperfection as well as on the individual utility and survival probability functions. Our simulations based on the calibration of distributional weights and applied to the COVID-19 example suggest that the value per statistical life, and in turn the optimal level of public safety, should be adjusted downwards because of imperfect taxation. However, we also identify circumstances under which this result is reversed, so that imperfect taxation cannot generically justify less public safety.

Suggested Citation

  • Treich, Nicolas & Yang, Yuting, 2021. "Public Safety under Imperfect Taxation," TSE Working Papers 21-1188, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:125273
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Public safety; Environmental health; Imperfect taxation; Value per statistical life; Distortionary taxation; Wealth inequality; Risk aversion;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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