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Pareto Weights in Practice: A Quantitative Analysis Across 32 OECD Countries

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  • Bo Hyun Chang

    (University of Rochester)

  • Yongsung Chang

    (University of Rochester, Yonsei University)

  • Sun-Bin Kim

    (Yonsei University)

Abstract

We develop a quantitative heterogeneous-agents general equilibrium model that reproduces the income inequalities of 32 countries in the Organization for Economic Co-operation and Development. Using this model, we compute the optimal income tax progressivity and redistribution for each country under the equal-weight utili- tarian social welfare function. We simulate the voting outcome for the utilitarian optimal tax reform for each country. Finally, we uncover the Pareto weights in the social welfare functions of each country that justify the current redistribution policy.

Suggested Citation

  • Bo Hyun Chang & Yongsung Chang & Sun-Bin Kim, 2016. "Pareto Weights in Practice: A Quantitative Analysis Across 32 OECD Countries," Working papers 2016rwp-92, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2016rwp-92
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    3. Bo Hyun Chang & Yongsung Chang & Sun-Bin Kim, 2016. "Ex-ante Heterogeneity and Equilibrium Redistribution(Preliminary)," Working papers 2016rwp-93, Yonsei University, Yonsei Economics Research Institute.
    4. Heer, Burkhard & Scharrer, Christian, 2018. "The age-specific burdens of short-run fluctuations in government spending," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 45-75.

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    Keywords

    Income Inequality; Optimal Tax; Pareto Weights; Political Economy; Redistribution;
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