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"The Marginal Cost of Redistribution": Comment

Author

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  • Bev G. Dahley

    (University of Alberta)

  • Giuseppe C. Ruggeri

    (University of Alberta)

Abstract

The authors discuss the measurement and interpretation problems with Browning's 1993 analysis of the marginal cost of redistribution (MCR) through a linear income tax. They derive a general expression for the social MCR and show that Browning's measure inflates the MCR because (a) he ignores the income effects of tax changes and income transfers and (b) he defines the ratio of gains to losses in an arbitrary fashion. The authors argue that his conclusion that the MCR from general income redistribution programs is almost certain to be high is misleading because (a) there are other ways of redistributing income that may have lower cost and (b) the social gains from redistribution are also high .

Suggested Citation

  • Bev G. Dahley & Giuseppe C. Ruggeri, 1996. ""The Marginal Cost of Redistribution": Comment," Public Finance Review, , vol. 24(1), pages 44-62, January.
    • Handle: RePEc:sae:pubfin:v:24:y:1996:i:1:p:44-62
    DOI: 10.1177/109114219602400103
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    References listed on IDEAS

    as
    1. Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 227-243, April.
    2. repec:eee:labchp:v:1:y:1986:i:c:p:3-102 is not listed on IDEAS
    3. Usher, Dan, 1984. "An Instructive Derivation of the Expression for the Marginal Cost of Public Funds," Public Finance = Finances publiques, , vol. 39(3), pages 406-411.
    4. Ballard, Charles L, 1988. "The Marginal Efficiency Cost of Redistribution," American Economic Review, American Economic Association, vol. 78(5), pages 1019-1033, December.
    5. Edgar K. Browning, 1993. "The Marginal Cost of Redistribution," Public Finance Review, , vol. 21(1), pages 3-32, January.
    6. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    7. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
    8. Davies, James B & St-Hilaire, France & Whalley, John, 1984. "Some Calculations of Lifetime Tax Incidence," American Economic Review, American Economic Association, vol. 74(4), pages 633-649, September.
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    Cited by:

    1. Edgar K. Browning, 2002. "The Case Against Income Redistribution," Public Finance Review, , vol. 30(6), pages 509-530, November.

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