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Interpreting Net Fiscal Incidence Calculations

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  • Piggott, John
  • Whalley, John

Abstract

This paper evaluates calculations of net fiscal incidence, using an applied general equilibrium model of Australia into which public goods are incorporated. Results indicate that it is inappropriate to regard the redistributive impacts of government policies as a zero sum game. For large reductions in public goods provision and taxes, the dominant effect is the foregone consumer surplus from suboptimal public goods provision. In addition, the redistributive pattern of small charges are quite different from large charges. Marginal and average net fiscal incidence, thus, need to be clearly separated, a point not emphasized in existing literature. Copyright 1987 by MIT Press.

Suggested Citation

  • Piggott, John & Whalley, John, 1987. "Interpreting Net Fiscal Incidence Calculations," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 685-694, November.
    • Handle: RePEc:tpr:restat:v:69:y:1987:i:4:p:685-94
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    Cited by:

    1. Haizhen Mou & Stanley L. Winer, 2010. "Fiscal Incidence When Both Individual Welfare and Family Structure Matter: The Case of Subsidization of Home -care for the Elderly," ICER Working Papers 15-2010, ICER - International Centre for Economic Research.
    2. Lanjouw, Peter & Ravallion, Martin, 1998. "Benefit incidence and the timing of program capture," Policy Research Working Paper Series 1956, The World Bank.
    3. Barbora Slintáková, 2014. "Cost of Service Approach to the Measurement of Public Expenditure Incidence [Nákladový přístup k měření dopadu veřejných výdajů]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2014(2), pages 92-105.
    4. Selden, Thomas M. & Wasylenko, Michael J., 1992. "Benefit incidence analysis in developing countries," Policy Research Working Paper Series 1015, The World Bank.
    5. Kaplow, Louis, 2006. "Public goods and the distribution of income," European Economic Review, Elsevier, vol. 50(7), pages 1627-1660, October.
    6. Yu, Wusheng & Hensen, Hans G., 2010. "Modeling Agricultural Domestic Support Policy in China: recent policy reversals and two future scenarios," Conference papers 331919, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Chao, Chi-Chur & Yu, Eden S.H. & Yu, Wusheng, 2009. "Government budget, public-sector wages and capital taxes in a small open economy: A Hong Kong case," China Economic Review, Elsevier, vol. 20(1), pages 54-64, March.
    8. Filip Palda, 1997. "Fiscal Churning and Political Efficiency," Kyklos, Wiley Blackwell, vol. 50(2), pages 189-206, May.
    9. Simone Salotti & Carmine Trecroci, 2018. "Cross-country evidence on the distributional impact of fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 50(51), pages 5521-5542, November.
    10. Filip Palda, 2005. "Why Do Voters Demand Universal Government Benefits?," Public Economics 0503009, University Library of Munich, Germany.
    11. Shah, Anwar & Whalley, John, 1990. "An alternative view of tax incidence analysis for developing countries," Policy Research Working Paper Series 462, The World Bank.
    12. John Ablett, 1996. "Generational Accounting and Intergenerational Balance," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 3(4), pages 407-418.
    13. Cormac O'Dea & Ian Preston, 2012. "The distributional impact of public spending in the UK," IFS Working Papers W12/06, Institute for Fiscal Studies.
    14. Marianne F. Johnson, 2003. "Differential Taxation of for-Profit and Nonprofit Firms: A Computational General Equilibrium Approach," Public Finance Review, , vol. 31(6), pages 623-647, November.

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