Tax reform and welfare measurement: do we need demand system estimation?
The exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences. Typically, first-order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects. The authors derive second-order approximations which, unlike first-order approximations, require knowledge of the distribution of substitution elasticities. This paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform. In the authors' empirical examples, first-order approximations display systematic biases; second-order approximations always work well. Copyright 1996 by Royal Economic Society.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jan 1994|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.ukEmail:
More information through EDIRC
|Order Information:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:94/11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Seavers)
If references are entirely missing, you can add them using this form.