Distributional Weights in Cost-Benefit Analysis—Should We Forget about Them?

Olof Johansson-Stenman ()

Land Economics, 2005, vol. 81, issue 3

Abstract: Many argue that it is socially inefficient to use distributional weights in cost-benefit analysis, and that doing so implies large inefficiency losses,when distributional matters can be dealt with trough income taxation, instead. Our results question this view, by showing a large range of cases when distributional weights are (second-best) optimal to use. One example is when different provided goods affect tax-revenues equally per dollar spent; utility functions that are separable in the provided goods is sufficient for this. Most results hold for linear and non-linear income taxes and whether they are optimal or not. General policy implications are discussed.

JEL-codes: D61 H21 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (35)

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