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

Olivier Bargain, Mathias Dolls, Dirk Neumann (), Andreas Peichl and Sebastian Siegloch

No 5440, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: social preferences; redistribution; optimal income taxation; labor supply (search for similar items in EconPapers)
JEL-codes: C63 D63 H11 H21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2011-01
New Economics Papers: this item is included in nep-eec, nep-eur, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published - revised version pubished in 2 parts - as 'Comparing inequality aversion across countries when labor supply responses differ' in: International Tax and Public Finance, 2014, 21, 845 - 873 (also available as IZA DP 7215) and as 'Tax-Benefit Revealed Social Preferences in Europe and the US' in: Annals of Economics and Statistics, 2014, 113/114, 257 -28

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Related works:
Working Paper: Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency (2011)
Working Paper: Tax-benefit systems in Europe and the US: between equity and efficiency (2011)
Working Paper: Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency (2011)
Working Paper: Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency (2011)
Working Paper: Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency (2011)
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