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http://ssrn.com/abstract=1745715
 
 

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Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency


Olivier Bargain


Institute for the Study of Labor (IZA); University College Dublin (UCD)

Mathias Dolls


University of Cologne - Faculty of Management, Economics and Social Sciences; IZA

Dirk Neumann


University of Cologne

Andreas Peichl


Centre for European Economic Research (ZEW); University of Mannheim - School of Economics (VWL); Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

Sebastian Siegloch


Institute for the Study of Labor (IZA); University of Mannheim - Department of Economics; Centre for European Economic Research (ZEW) - Corporate Taxation and Public Finance Research; CESifo (Center for Economic Studies and Ifo Institute)


IZA Discussion Paper No. 5440

Abstract:     
Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor supply elasticities on microdata and adopt an inverted optimal tax approach to characterize the redistributive preferences embodied in the welfare systems of 17 EU countries and the US. Implicit social welfare functions are broadly compatible with the fiction of an optimizing Paretian social planner. Some exceptions due to generous demogrant transfers are consistent with the ignorance of behavioral responses by some European governments and are partly corrected by recent policy developments. Heterogeneity in leisure-consumption preferences somewhat affect the international comparison in degrees of revealed inequality aversion, but differences in social preferences are significant only between broad groups of countries.

Number of Pages in PDF File: 45

Keywords: social preferences, redistribution, optimal income taxation, labor supply

JEL Classification: H11, H21, D63, C63

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Date posted: January 24, 2011  

Suggested Citation

Bargain, Olivier and Dolls, Mathias and Neumann, Dirk and Peichl, Andreas and Siegloch, Sebastian, Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency. IZA Discussion Paper No. 5440. Available at SSRN: http://ssrn.com/abstract=1745715

Contact Information

Olivier Bargain (Contact Author)
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
University College Dublin (UCD) ( email )
Belfield, Dublin 4 4
Ireland
+353 1 716 8357 (Phone)
+353 1 283 0068 (Fax)
HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm
Mathias Dolls
University of Cologne - Faculty of Management, Economics and Social Sciences ( email )
Richard-Strauss-Str. 2
Cologne, D-50923
Germany
IZA
P.O. Box 7240
Bonn, D-53072
Germany
HOME PAGE: http://www.iza.org/
Dirk Neumann
University of Cologne ( email )
Albertus-Magnus-Platz
Cologne, 50923
Germany
Andreas Peichl
Centre for European Economic Research (ZEW) ( email )
P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany
University of Mannheim - School of Economics (VWL) ( email )
Mannheim 68131
Germany
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
University of Essex - Institute for Social and Economic Research (ISER)
Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
Sebastian Siegloch
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
University of Mannheim - Department of Economics ( email )
D-68131 Mannheim
Germany
Centre for European Economic Research (ZEW) - Corporate Taxation and Public Finance Research ( email )
United States
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany
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