Tax Reform and Welfare Measurement: Do We Need Demand System Estimation?
James Banks,
Richard Blundell () and
Arthur Lewbel
Economic Journal, 1996, vol. 106, issue 438, 1227-41
Abstract:
The exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences. Typically, first-order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects. The authors derive second-order approximations which, unlike first-order approximations, require knowledge of the distribution of substitution elasticities. This paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform. In the authors' empirical examples, first-order approximations display systematic biases; second-order approximations always work well. Copyright 1996 by Royal Economic Society.
Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (108)
Downloads: (external link)
http://links.jstor.org/sici?sici=0013-0133%2819960 ... 0.CO%3B2-9&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
Related works:
Working Paper: Tax reform and welfare measurement: do we need demand system estimation? (1994) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:106:y:1996:i:438:p:1227-41
Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133
Access Statistics for this article
Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen
More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().