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Tax-Benefit Revealed Social Preferences in Europe and the US


  • Olivier Bargain
  • Mathias Dolls
  • Dirk Neumann
  • Andreas Peichl
  • Sebastian Siegloch


We follow the inverted optimal tax approach to characterize and compare "tax-benefit revealed" social preferences in 17 EU countries and the US. Following Bargain et al. (2013), we invert the optimal income taxation model on the distributions of net and gross incomes and use labor supply elasticities consistently estimated on the same data. The present paper focuses on new outputs of particular interest for the current policy debate on in-work versus traditional social transfers. Results are as follows: We find that revealed marginal social welfare functions verify minimal consistency checks and, notably, respect Paretianity over-all. An exception is due to the treatment of the working poor in countries with standard, demogrant transfers. We illustrate for some countries how the recent policy trend in Continental and Nordic Europe tends to correct this "anomaly" through redistributive reforms in favor of the working poor. Finally, we compare revealed and stated social preferences using direct survey information and suggest explanations for the apparent discrepancies.

Suggested Citation

  • Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2014. "Tax-Benefit Revealed Social Preferences in Europe and the US," Annals of Economics and Statistics, GENES, issue 113-114, pages 257-289.
  • Handle: RePEc:adr:anecst:y:2014:i:113-114:p:257-289 DOI: 10.15609/annaeconstat2009.113-114.257

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    References listed on IDEAS

    1. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1449-1477, August.
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    Cited by:

    1. Benjamin B. Lockwood & Matthew Weinzierl, 2014. "Positive and Normative Judgments Implicit in U.S. Tax Policy, and the Costs of Unequal Growth and Recessions," Harvard Business School Working Papers 14-119, Harvard Business School, revised Oct 2014.

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques


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