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Public Safety under Imperfect Taxation

Nicolas Treich and Yuting Yang

No 21-1188, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Standard benefit-cost analysis often ignores distortions caused by taxation and the heterogeneity of taxpayers. In this paper, we theoretically and numerically explore the effect of imperfect taxation on the public provision of mortality risk reductions (or public safety). We show that this effect critically depends on the source of imperfection as well as on the individual utility and survival probability functions. Our simulations based on the calibration of distributional weights and applied to the COVID-19 example suggest that the value per statistical life, and in turn the optimal level of public safety, should be adjusted downwards because of imperfect taxation. However, we also identify circumstances under which this result is reversed, so that imperfect taxation cannot generically justify less public safety.

Keywords: Public safety; Environmental health; Imperfect taxation; Value per statistical life; Distortionary taxation; Wealth inequality; Risk aversion (search for similar items in EconPapers)
JEL-codes: D61 H21 H41 I18 Q51 (search for similar items in EconPapers)
Date: 2021-02-06
New Economics Papers: this item is included in nep-env, nep-hea, nep-ore, nep-pbe, nep-pub and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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