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The marginal value of public funds: a brief guide and application to tax policy

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  • Spencer Bastani

    (Institute for Evaluation of Labour Market and Education Policy (IFAU)
    Department of Economics, Uppsala University, Research Institute of Industrial Economics (IFN), Uppsala Center for Fiscal Studies (UCFS), Uppsala Center for Labor Studies (UCLS))

Abstract

This paper provides a brief and accessible guide to the Marginal Value of Public Funds (MVPF) and offers some new perspectives on its application to the evaluation of tax policy. Specifically, the paper aims to: (i) bridge the gap between traditional uses of the Marginal Cost of Public Funds and the growing interest in the MVPF approach, (ii) highlight the crucial link between the MVPF and tax policy, (iii) critically discuss empirical quantification, particularly with respect to tax elasticities, and (iv) explore distributional considerations and their connection to the literature on optimal redistributive taxation.

Suggested Citation

  • Spencer Bastani, 2025. "The marginal value of public funds: a brief guide and application to tax policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(4), pages 919-956, August.
    • Handle: RePEc:kap:itaxpf:v:32:y:2025:i:4:d:10.1007_s10797-024-09860-x
    DOI: 10.1007/s10797-024-09860-x
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    Keywords

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    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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