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Efficiency Costs and the Demand for Income Redistribution

Author

Listed:
  • Christopher B. Colburn

    (Old Dominion University)

  • John B. Horowitz

    (Ball State University)

Abstract

This study includes the marginal cost of redistribution (MCR) in analyzing the adjusted tax price faced by the median voter. The adjusted tax price is then used to analyze the degree to which efficiency costs change the level of income redistribution provided through the Aid to Families with Dependent Children (AFDC) program. The results of this article suggest that efficiency costs, on average, raise the cost of AFDC transfers by approximately 28% and reduces the level of AFDC redistribution by about 14.6%.

Suggested Citation

  • Christopher B. Colburn & John B. Horowitz, 1998. "Efficiency Costs and the Demand for Income Redistribution," Public Finance Review, , vol. 26(3), pages 214-230, May.
    • Handle: RePEc:sae:pubfin:v:26:y:1998:i:3:p:214-230
    DOI: 10.1177/109114219802600302
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    References listed on IDEAS

    as
    1. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-371, June.
    2. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Plotnick, Robert D. & Winters, Richard F., 1985. "A Politico-Economic Theory of Income Redistribution," American Political Science Review, Cambridge University Press, vol. 79(2), pages 458-473, June.
    5. Moffitt, Robert, 1990. "Has State Redistribution Policy Grown More Conservative?," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(2), pages 123-142, June.
    6. Browning, Edgar K & Johnson, William R, 1984. "The Trade-Off between Equality and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 175-203, April.
    7. Edward M. Gramlich, 1982. "An Econometric Examination of the New Federalism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(2), pages 327-370.
    8. William Sander & J. Giertz, 1986. "The political economy of state level welfare benefits," Public Choice, Springer, vol. 51(2), pages 209-219, January.
    9. Wallace, T D & Hussain, Ashiq, 1969. "The Use of Error Components Models in Combining Cross Section with Time Series Data," Econometrica, Econometric Society, vol. 37(1), pages 55-72, January.
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    Cited by:

    1. John B. Horowitz, 2002. "Why Higher Real Wages May Reduce Altruism for the Poor," Eastern Economic Journal, Eastern Economic Association, vol. 28(3), pages 351-362, Summer.

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