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In praise of wasteful spending

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  • Landsburg, Steven E.

Abstract

In the presence of distortionary taxation, the destruction of wealth–either by an act of government or an act of God–can be welfare improving, because it increases the supply of labor and therefore (holding government spending constant) allows distortionary taxes to be lowered. We show that under reasonable assumptions, there must be tax rates at which this effect occurs.

Suggested Citation

  • Landsburg, Steven E., 2014. "In praise of wasteful spending," Economics Letters, Elsevier, vol. 124(3), pages 449-451.
    • Handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:449-451
    DOI: 10.1016/j.econlet.2014.05.023
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    References listed on IDEAS

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    1. Pelloni, Alessandra & Waldmann, Robert, 2000. "Can waste improve welfare?," Journal of Public Economics, Elsevier, vol. 77(1), pages 45-79, July.
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    More about this item

    Keywords

    Optimal taxation; Welfare; Fiscal policy;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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