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An Efficiency Approach to the Evaluation of Policy Changes

  • Coate, Stephen

This paper describes an efficiency approach to the evaluation of policy changes. Rather than comparing the utility allocations that arise before and after a policy change is introduced, this approach evaluates a policy change by comparing it with other possible changes which might be made from the status quo. The main merit of the approach is that it is founded on the Pareto criterion rather than on a distributional value judgment. The paper provides a precise statement of the approach and applies it to a number of examples. Some objections to the approach are also anticipated and discussed.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 110 (2000)
Issue (Month): 463 (April)
Pages: 437-55

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Handle: RePEc:ecj:econjl:v:110:y:2000:i:463:p:437-55
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  1. Dasgupta, Partha & Stiglitz, Joseph E, 1972. "On Optimal Taxation and Public Production," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 87-103, January.
  2. Boadway, Robin W, 1974. "The Welfare Foundations of Cost-Benefit Analysis," Economic Journal, Royal Economic Society, vol. 84(336), pages 926-39, December.
  3. Robin Boadway & Katherine Cuff, 1999. "A Minimum Wage can be Welfare-Improving and Employment-Enhancing," Working Papers 980, Queen's University, Department of Economics.
  4. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  5. Charles Blackorby & David Donaldson, 1990. "A Review Article: The Case against the Use of the Sum of Compensating Variations in Cost-Benefit Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 471-94, August.
  6. Harberger, Arnold C, 1978. "On the Use of Distributional Weights in Social Cost-Benefit Analysis," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S87-120, April.
  7. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-78, August.
  8. Guesnerie, Roger & Roberts, Kevin, 1984. "Effective Policy Tools and Quantity Controls," Econometrica, Econometric Society, vol. 52(1), pages 59-86, January.
  9. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier.
  10. Dexit, A. & Grossman, G.M. & Helpman, E., 1996. "Common Agency and Coordination: General Theory and Application to Tax Policy," Papers 11-96, Tel Aviv.
  11. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Bullock, David S, 1995. "Are Government Transfers Efficient? An Alternative Test of the Efficient Redistribution Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1236-74, December.
  13. Weymark, John A., 1981. "Undominated directions of tax reform," Journal of Public Economics, Elsevier, vol. 16(3), pages 343-369, December.
  14. Richard Harris, 1976. "Efficient Commodity Taxation," Working Papers 243, Queen's University, Department of Economics.
  15. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  16. Mirrlees, James A, 1972. "On Producer Taxation," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 105-11, January.
  17. Dixit, Avinash & Norman, Victor, 1986. "Gains from trade without lump-sum compensation," Journal of International Economics, Elsevier, vol. 21(1-2), pages 111-122, August.
  18. Guesnerie, Roger & Roberts, Kevin, 1987. "Minimum wage legislation as a second best policy," European Economic Review, Elsevier, vol. 31(1-2), pages 490-498.
  19. Allen, Stephen P, 1987. "Taxes, Redistribution, and the Minimum Wage: A Theoretical Analysis," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 477-89, August.
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