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Genuine Saving and the Social Cost of Taxation

Author

Listed:
  • Aronsson, Thomas

    () (Department of Economics, Umeå University)

  • Cialani, Catia

    () (Department of Economics, Umeå University)

  • Löfgren, Karl-Gustaf

    () (Department of Economics, Umeå University)

Abstract

Following the 1987 report by The World Commission on Environment and Development, the genuine saving has come to play a key role in the context of sustainable development, and the World Bank regularly publishes numbers for genuine saving on a national basis. However, these numbers are typically calculated as if the tax system is non-distortionary. This paper presents an analogue to genuine saving in a second best economy, where the government raises revenue by means of distortionary taxation. We show how the social cost of public debt, which depends on the marginal excess burden, ought to be reflected in the genuine saving. By presenting calculations for Greece, Japan, Portugal, U.K., U.S. and OECD-average, we also show that the numbers published by the World Bank are likely to be biased and may even give incorrect information as to whether the economy is locally sustainable.

Suggested Citation

  • Aronsson, Thomas & Cialani, Catia & Löfgren, Karl-Gustaf, 2011. "Genuine Saving and the Social Cost of Taxation," Umeå Economic Studies 826, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0826
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    More about this item

    Keywords

    Welfare change; investment; saving; taxation;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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