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Efficiency and Redistribution: An Evaluative Review of Louis Kaplow's The Theory of Taxation and Public Economics

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  • Robin Boadway

Abstract

Louis Kaplow proposes a two-step methodology for normative policy analysis and illustrates it using various policy reforms. The first step is to identify efficiency gains when hypothetical lump-sum taxes can undo redistributive consequences. The second step evaluates the redistributive effects using a strictly welfaristic social welfare function. I critically review the foundations for Kaplow's procedure and its reliance on strict welfarism. I argue that basing efficiency gains on hypothetical lump-sum tax adjustment can lead to social welfare reducing policies if such tax adjustments are not carried out. I also indicate some conceptual problems with translating welfarism into policy evaluation when individuals have different utility function, and review one promising alternative approach.(JEL H20, H41, H50)

Suggested Citation

  • Robin Boadway, 2010. "Efficiency and Redistribution: An Evaluative Review of Louis Kaplow's The Theory of Taxation and Public Economics," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 964-979, December.
    • Handle: RePEc:aea:jeclit:v:48:y:2010:i:4:p:964-79
    Note: DOI: 10.1257/jel.48.4.964
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    References listed on IDEAS

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    Cited by:

    1. Widiyanti, Dwi Retno, 2015. "Redistribution Adjusts Efficiency In Economy; Islamic Paradigm," MPRA Paper 67809, University Library of Munich, Germany, revised 01 Nov 2015.
    2. Odd E. Nygård & John T. Revesz, 2015. "Optimal indirect taxation and the uniformity debate: A review of theoretical results and empirical contributions," Discussion Papers 809, Statistics Norway, Research Department.
    3. Keuschnigg, Christian, 2011. "Intra- und intergenerative Gerechtigkeit in der Finanzpolitik," Economics Working Paper Series 1137, University of St. Gallen, School of Economics and Political Science.
    4. Hultkrantz, Lars & Svensson, Mikael, 2012. "A Comparison of Benefit Cost and Cost Utility Analysis in Practice: Divergent Policies in Sweden," Karlstad University Working Papers in Economics 1, Karlstad University, Department of Economics.
    5. Nicholas, Aaron, 2022. "Invisible Hand, invisible morals: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 395-418.
    6. Odd E. Nygard & John T. Revesz, 2016. "A literature review on optimal indirect taxation and the uniformity debate," Hacienda Pública Española / Review of Public Economics, IEF, vol. 218(3), pages 107-140, September.
    7. Nyborg, Karine, 2014. "Project evaluation with democratic decision-making: What does cost–benefit analysis really measure?," Ecological Economics, Elsevier, vol. 106(C), pages 124-131.
    8. John T. Revesz, 2014. "A Numerical Model of Optimal Differentiated Indirect Taxation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 211(4), pages 9-66, December.
    9. Mr. Sanjeev Gupta & Sugata Marjit & Sandip Sarkar, 2018. "An Application of Distribution-Neutral Fiscal Policy," IMF Working Papers 2018/012, International Monetary Fund.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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