A Note on Cost‐Benefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes
Stockholm School of Economics
April 8, 2010
CERE Working Paper No. 2010:5
In this note we discuss how to treat taxes in a cost-benefit analysis (CBA). In particular we relate the shadow price of taxes in CBA to the concepts the marginal cost of public funds MCPF) and the marginal excess burden (MEB) of taxes. In particular we demonstrate that the MCPF is equal to one plus the MEB for a marginal increase in a distortionary tax.
Number of Pages in PDF File: 15
Keywords: Cost-benefit analysis, marginal cost of public funds, excess burden, taxation
JEL Classification: H21, H41, H43, Q51working papers series
Date posted: April 12, 2010
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