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Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)

  • Alan J. Auerbach
  • Harvey S. Rosen

It is well understood that a tax which distorts relative prices generates a welfare cost or "excess burden" in addition to any associated transfer of resources, but there remains considerable controversy and confusion with respect to procedures for measuring this excess burden. The purpose of this paper is to clarify matters concerning what is one of the most basic concepts in welfare economics. We describe and evaluate a number of alternative conceptual experiments which might lie behind an excess burden calculation, showing how these notions can be represented graphically and algebraically and how they can be approximated numerically.

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File URL: http://www.nber.org/papers/w0495.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0495.

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Date of creation: Jun 1980
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Publication status: published as The Fiscal Behavior of State and Local Governments, Rosen, H., ed., Edward Elgar Publishing, 1997, pp. 301-322.
Handle: RePEc:nbr:nberwo:0495
Note: PE
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  1. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
  2. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February.
  3. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-30, January.
  4. Rosen, Harvey S, 1978. "The Measurement of Excess Burden with Explicit Utility Functions," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S121-35, April.
  5. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
  6. Wales, T J & Woodland, A D, 1976. "Estimation of Household Utility Functions and Labor Supply Response," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 397-410, June.
  7. Hause, John C, 1975. "The Theory of Welfare Cost Measurement," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1145-82, December.
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