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Redistributing Income and Relative Efficiency

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  • Sam Allgood

Abstract

This article considers the relative efficiency of marginally redistributing income from high- to low-income households. Additional spending on a negative income tax is compared with spending on an earnings or a wage subsidy. One set of reforms imposes the same burden on the nonpoor, and another set redistributes the same net benefit to the working poor. Additional spending on a negative income tax is more efficient than spending a similar amount on an earnings subsidy (the Earned Income Tax Credit), for some reforms and parameters. The wage subsidy is the most efficient, independent of parameters or type of reform. (JEL H2, H3, I3) Copyright 2003, Oxford University Press.

Suggested Citation

  • Sam Allgood, 2003. "Redistributing Income and Relative Efficiency," Economic Inquiry, Western Economic Association International, vol. 41(3), pages 480-495, July.
  • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:3:p:480-495
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    File URL: http://hdl.handle.net/10.1093/ei/cbg022
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    Cited by:

    1. Sam Allgood, 2009. "The Collective Household, Household Production and Efficiency of Marginal Reforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(5), pages 749-771, October.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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