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Tax-benefit revealed social preferences

  • François Bourguignon

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris, The World Bank - The World Bank)

  • Amadéo Spadaro

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris, Universitat de les Illes Balears - Universitat de les Illes Balears)

This paper inverts the usual logic of applied optimal income taxation. It starts from the observed distribution of income before and after redistribution and corresponding marginal tax rates. Under a set of simplifying assumptions, it is then possible to recover the social welfare function that would make the observed marginal tax rate schedule optimal. In this framework, the issue of the optimality of an existing tax-benefit system is transformed into the issue of the shape of the social welfare function associated with that system and whether it satisfies elementary properties. This method is applied to the French redistribution system with the interesting implication that the French redistribution authority either has a rather low estimate of the labor supply elasticity or does not give positive social weights to the richest tax payers.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00590779.

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Date of creation: Jul 2005
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Handle: RePEc:hal:psewpa:halshs-00590779
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  1. François Bourguignon & Amedeo Spadaro, 2000. "Redistribution et incitations au travail. Une application empirique simple de la fiscalité optimale," Revue Économique, Programme National Persée, vol. 51(3), pages 473-487.
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