| By: |
Stephane Gauthier (PSE - Paris School of Economics);
Taraneh Tabatabai (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: |
We use the Targeted Subsidies Reform implemented in Iran in 2011 to recover
empirically the social valuations of Iranian households relying on the
assumption of optimal taxes. Unlike the existing literature, we do not
restrict attention to a specific pattern for the incentive constraints
associated with nonlinear income taxation. Instead we recover the Lagrange
multipliers corresponding to these constraints. We find evidence of a
significant redistribution toward the bottom three deciles of the income
distribution before the reform. This redistribution is however limited by an
incentive constraint where the rich envy the social treatment of the poor. At
the outcome of the reform incentives no longer matter and the social welfare
function of the government of Iran displays a Benthamite-like form. |
| Keywords: |
social valuations,Iran,Targeted Subsidies,Principal-agent,incentive constraints,AIDS |
| Date: |
2017–06–20 |
| URL: |
http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01542799&r=cwa |