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Publications
  • 1979
  • Article
  • Journal of Public Economics

Approximating the Efficiency Gain of Tax Reforms

By: Jerry R. Green and Eytan Sheshinski
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Abstract

Proper analysis of tax reform requires evaluation of the welfare effects induced by a change from one tax system to another. We present two methods for estimating these changes using only local information pertaining to an initial equilibrium with distortive taxes. It is shown that these methods provide very accurate approximations to the true gains even when large tax changes are involved. Concentrating on a model with capital and labor income taxes, we show that other approximations whose reference point is a nondistortive equilibrium are considerably less precise. Some concluding remarks are made on the potential of these methods for optimization purposes.

Keywords

Taxation; Governing Rules, Regulations, and Reforms; Change; Analysis

Citation

Green, Jerry R., and Eytan Sheshinski. "Approximating the Efficiency Gain of Tax Reforms." Journal of Public Economics 11, no. 2 (1979): 179–195.
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About The Author

Jerry R. Green

Negotiation, Organizations & Markets
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    Choice-based Measures of Conflict in Preferences

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More from the Authors
  • Assent-maximizing Social Choice By: Katherine A. Baldiga and Jerry R. Green
  • Let the Right One In: A Microeconomic Approach to Partner Choice in Mutualisms By: Marco Archetti, Francisco Ubeda, Drew Fudenberg, Jerry R. Green, Naomi E. Pierce and Douglas W. Yu
  • Choice-based Measures of Conflict in Preferences By: Katherine Baldiga and Jerry R. Green
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