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Pareto Weights in Practice: A Quantitative Analysis of 32 OECD Countries

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  • Bo Hyun Chang

    (University of Rochester)

  • Yongsung Chang

    (University of Rochester)

  • Sun-Bin Kim

    (Yonsei University)

Abstract

We develop a quantitative heterogeneous-agents general equilibrium model that reproduces the income inequalities of 32 countries in the Organization for Economic Co-operation and Development. Using this model, we compute the optimal income tax progressivity and redistribution for each country under the equal-weight utilitarian social welfare function. A policy reform to adopt the optimal progressivity is supported by the majority of the population. Finally, we uncover the Pareto weights in the social welfare functions of each country that justify the current redistribution policy. (Copyright: Elsevier)

Suggested Citation

  • Bo Hyun Chang & Yongsung Chang & Sun-Bin Kim, 2018. "Pareto Weights in Practice: A Quantitative Analysis of 32 OECD Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 181-204, April.
    • Handle: RePEc:red:issued:16-35
    DOI: 10.1016/j.red.2017.08.002
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    7. Alexis Anagnostopoulos & Eva Carceles-Poveda & Yair Tauman, 2018. "Value Preserving Welfare Weights for Social Optimization," Department of Economics Working Papers 18-08, Stony Brook University, Department of Economics.
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