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How Big Should Government Be?

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  • Feldstein, Martin

Abstract

Suggests that the deadweight burden caused by a tax rate increase depends not only on labor force participation response but also on other dimensions of labor supply (the forms in which compensation is paid; the forms of tax-favored consumption; and intertemporal allocation of consumption.) Recent econometric work implies that the deadweight burden caused by incremental taxation (the marginal excess burden) may exceed one dollar per dollar of revenue raised, making the cost of incremental government spending more than two dollars for each dollar of government spending.

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  • Feldstein, Martin, 1997. "How Big Should Government Be?," Scholarly Articles 3043427, Harvard University Department of Economics.
  • Handle: RePEc:hrv:faseco:3043427
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    References listed on IDEAS

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    1. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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