On the (ir)relevence of distribution and labor supply distortion of government policy
By: Louis Kaplow.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10490; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10490.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Should the assessment of government policies, such as the provision of public goods and the control of externalities, deviate from first-best principles to account for distributive effects and for the distortionary cost of labor income taxation? For example, is the optimal extent of public goods provision smaller than indicated by the Samuelson rule because finance is distortionary? Or should environmental regulations fail to internalize externalities fully if the incidence of the regulations is regressive? It is suggested that these questions are best addressed by considering distribution-neutral implementation, in which budget balance is achieved by choosing an adjustment to the income tax that offsets the distributive impact of the policy in question.  In basic cases, both distribution and labor supply distortion are moot because the target policy and the tax adjustment produce offsetting effects on each.  Thus, traditional first-best principles provide good benchmarks for policy analysis after all.  Moreover, even when actual implementation will not be distribution neutral in aggregate, distribution-neutral policy analysis has many conceptual and practical virtues that render it quite useful to investigators"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/12/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.