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An Investigation into Alternative Representations of the Marginal Cost of Public Funds

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  • Lars Hokonsen

Abstract

The literature on the marginal cost of public funds (MCF) and the marginal excess burden is presently a very rich one. A problem with this literature, is that several different measures are interpreted as MCF. This paper derives and compares some commonly used measures, and introduces an alternative. Performing a cross-comparison of the various measures seems to be a useful exercise in order to be able to distinguish between which measure is telling us what. Such a taxonomy might clarify the sense in which the different concepts should be used in future writings on this field. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Lars Hokonsen, 1998. "An Investigation into Alternative Representations of the Marginal Cost of Public Funds," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 329-343, July.
  • Handle: RePEc:kap:itaxpf:v:5:y:1998:i:3:p:329-343
    DOI: 10.1023/A:1008686227749
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    References listed on IDEAS

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    9. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127 Elsevier.
    10. Triest, Robert K, 1990. "The Relationship between the Marginal Cost of Public Funds and Marginal Excess Burden," American Economic Review, American Economic Association, vol. 80(3), pages 557-566, June.
    11. Snow, Arthur & Warren, Ronald Jr., 1996. "The marginal welfare cost of public funds: Theory and estimates," Journal of Public Economics, Elsevier, vol. 61(2), pages 289-305, August.
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    Citations

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    Cited by:

    1. Sørensen Anders, 2006. "R&D Subsidies and the Surplus Appropriability Problem," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(2), pages 1-29, August.
    2. José Manuel González-Páramo & Diego Martínez López, 2002. "Provisión eficiente de inversión pública financiada con impuestos distorsionantes," Economic Working Papers at Centro de Estudios Andaluces E2002/08, Centro de Estudios Andaluces.
    3. repec:ebl:ecbull:v:8:y:2007:i:9:p:1-10 is not listed on IDEAS
    4. Lundholm, Michael, 2005. "Cost-Benefit Analysis and the Marginal Cost of Public Funds," Research Papers in Economics 2005:3, Stockholm University, Department of Economics.
    5. Bas Jacobs, 2010. "The Marginal Cost of Public Funds is One," CESifo Working Paper Series 3250, CESifo Group Munich.
    6. Bjørn Sandvik, 2003. "Optimal Taxation and Normalisations," CESifo Working Paper Series 1025, CESifo Group Munich.
    7. Agnar Sandmo, 2001. "Bridging the Tax-Expenditure Gap: Green Taxes and the Marginal Cost of Funds," CESifo Working Paper Series 579, CESifo Group Munich.
    8. Warlters, Michael & Auriol, Emmanuelle, 2005. "The marginal cost of public funds in Africa," Policy Research Working Paper Series 3679, The World Bank.
    9. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier.
    10. Lawrence H. Goulder & Roberton C. Williams III, 1999. "The Usual Excess-Burden Approximation Usually Doesn't Come Close," NBER Working Papers 7034, National Bureau of Economic Research, Inc.
    11. Diego Martínez López & A. Jesús Sánchez Fuentes, "undated". "Optimal Provision Of Public Inputs In A Second Best Scenario (*)," Working Papers 17-05 Classification-JEL , Instituto de Estudios Fiscales.
    12. José Manuel González-Páramo, "undated". "Midiendo El Coste Marginal En Bienestar De Una Reforma Impositiva," Working Papers 32-02 Classification-JEL , Instituto de Estudios Fiscales.

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