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on Public Finance |
| By: | Bargain, Olivier (University College Dublin) |
| Abstract: | Using counterfactual microsimulations, Shapley decompositions of time change in inequality and poverty indices make it possible to disentangle and quantify the relative effect of tax-benefit policy changes, compared to all other effects including shifts in the distribution of market income. Using this approach also helps to clarify the different issues underlying the distributional evaluation of policy reforms. An application to the UK (1998-2001) confirms previous findings that inequality and depth of poverty would have increased under the first New Labour government, had important reforms like the extensions of income support and tax credits not been implemented. These reforms have also contributed to substantially reduce poverty among families with children and pensioners. |
| Keywords: | tax-benefit policy, inequality, poverty, Shapley decomposition, microsimulation |
| JEL: | H23 H53 I32 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4296&r=pub |
| By: | Juan Carlos Conesa; Carlos Garriga |
| Abstract: | In this paper we show that the generational accounting framework used in macroeconomics to measure tax incidence can, in some cases, yield inaccurate measurements of the tax burden across age cohorts. This result is very important for policy evaluation, because it shows that the selection of tax policies designed to change generational imbalances could be misleading. We illustrate this problem in the context of a Social Security reform where we show how fiscal policy can affect the intergenerational gap across cohorts without impacting the distribution of welfare. We provide a more accurate procedure that only measures changes in generational imbalances derived from policies with real effects. |
| Keywords: | Fiscal policy ; Taxation |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-003&r=pub |
| By: | Carlos Garriga; Fernando Sánchez-Losada |
| Abstract: | This article examines the properties of the optimal fiscal policy in an economy with warm-glow altruism (utility interdependence) and heterogeneous individuals. We propose a new efficiency concept, D-efficiency, that considers an implicit constraint in the act of giving: donors cannot bequeath to donees more than their existing resources. Considering this constraint, we show that the market equilibrium is not socially efficient. The efficient level of bequest transfers can be implemented by the market with estate and labor-income subsidies and a capital-income tax. In the absence of lump-sum taxation, the government faces a trade-off between minimizing distortions and eliminating external effects. The implied tax policy differs from Pigovian taxation since the government's ability to correct the external effects is limited. Finally, we show that the efficiency-equity trade-off does not affect the qualitative features of the optimal distortionary fiscal policy. |
| Keywords: | Altruism ; Taxation |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-004&r=pub |