Uncertain parameter values and the choice among policy options
In this paper, we use tax policy choices to illustrate and investigate the more general problem of using uncertain parameter values in models to evaluate policy choices. We show, for this tax example, how debate on an elasticity parameter translates into a debate about policy choices, andvice versa. To construct this example, we suppose that the choice among four particular tax reform options is based on a single measure of efficiency gain. We show how this gain from each reform depends upon the elasticity of saving with respect to the net rate of return. Within quite narrow and reasonable bounds for the elasticity parameter, we find regions in which each of three different tax reforms turns out to dominate the others.
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- Feldstein, Martin S, 1978.
"The Welfare Cost of Capital Income Taxation,"
Journal of Political Economy,
University of Chicago Press, vol. 86(2), pages S29-51, April.
- Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
- Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
- E. Philip Howrey & Saul H. Hymans, 1978. "The Measurement and Determination of Loanable-Funds Saving," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 655-685.
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- Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
- Fullerton, Don, et al, 1981. "Corporate Tax Integration in the United States: A General Equilibrium Approach," American Economic Review, American Economic Association, vol. 71(4), pages 677-91, September.
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