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

Author

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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    Cited by:

    1. Massiani, Jérôme & Maltese, Ila, 2022. "Thirty years of socio-economic evaluation of the Lyon–Turin High–Speed rail project," Research in Transportation Economics, Elsevier, vol. 94(C).

    More about this item

    Keywords

    Cost-benefit analysis; marginal cost of public funds; excess burden; taxation;
    All these keywords.

    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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