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A note on CostBenefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes

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Listed:
  • Johansson, Per-Olov

    () (Stockholm School of Economics and CERE)

  • Kriström, Bengt

    () (CERE)

Abstract

In this note we discuss how to treat taxes in a cost-benefit analysis (CBA). In particular we relate the shadow price of taxes in CBA to the concepts the marginal cost of public funds MCPF) and the marginal excess burden (MEB) of taxes. In particular we demonstrate that the MCPF is equal to one plus the MEB for a marginal increase in a distortionary tax.

Suggested Citation

  • Johansson, Per-Olov & Kriström, Bengt, 2010. "A note on CostBenefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes," CERE Working Papers 2010:5, CERE - the Center for Environmental and Resource Economics.
  • Handle: RePEc:hhs:slucer:2010_005
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    References listed on IDEAS

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    3. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, pages 3-28.
    4. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, pages 3-28.
    5. Maruejols, Lucie & Young, Denise, 2011. "Split incentives and energy efficiency in Canadian multi-family dwellings," Energy Policy, Elsevier, vol. 39(6), pages 3655-3668, June.
    6. Arik Levinson, 2001. "Energy Use By Apartment Tenants When Landlords Pay For Utilities," Working Papers gueconwpa~01-01-09, Georgetown University, Department of Economics.
    7. Kenneth Gillingham, Matthew Harding, and David Rapson, 2012. "Split Incentives in Residential Energy Consumption," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
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    9. Lucas W. Davis, 2008. "Durable goods and residential demand for energy and water: evidence from a field trial," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 530-546.
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    More about this item

    Keywords

    Cost-benefit analysis; marginal cost of public funds; excess burden; taxation;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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