IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0495.html
   My bibliography  Save this paper

Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)

Author

Listed:
  • Alan J. Auerbach
  • Harvey S. Rosen

Abstract

It is well understood that a tax which distorts relative prices generates a welfare cost or "excess burden" in addition to any associated transfer of resources, but there remains considerable controversy and confusion with respect to procedures for measuring this excess burden. The purpose of this paper is to clarify matters concerning what is one of the most basic concepts in welfare economics. We describe and evaluate a number of alternative conceptual experiments which might lie behind an excess burden calculation, showing how these notions can be represented graphically and algebraically and how they can be approximated numerically.

Suggested Citation

  • Alan J. Auerbach & Harvey S. Rosen, 1980. "Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)," NBER Working Papers 0495, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0495
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0495.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wales, T J & Woodland, A D, 1976. "Estimation of Household Utility Functions and Labor Supply Response," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 397-410, June.
    2. Harvey S. Rosen, 1978. "The Measurement of Excess Burden with Explicit Utility Functions," NBER Chapters, in: Research in Taxation, pages 121-135, National Bureau of Economic Research, Inc.
    3. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    4. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    5. Hause, John C, 1975. "The Theory of Welfare Cost Measurement," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1145-1182, December.
    6. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
    7. Arnold Harberger, 1964. "Taxation, Resource Allocation, and Welfare," NBER Chapters, in: The Role of Direct and Indirect Taxes in the Federal Reserve System, pages 25-80, National Bureau of Economic Research, Inc.
    8. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Don Fullerton, 1989. "If Labor is Inelastic, Are Taxes Still Distorting?," NBER Working Papers 2810, National Bureau of Economic Research, Inc.
    2. Lawrence Lindsey, 1983. "Alternatives to the Current Maximum Tax on Earned Income," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 83-108, National Bureau of Economic Research, Inc.
    3. Driffill, E John & Rosen, Harvey S, 1983. "Taxation and Excess Burden: A Life Cycle Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 671-683, October.
    4. Figari Francesco & Gandullia Luca & Lezzi Emanuela, 2018. "Marginal Cost of Public Funds: From the Theory to the Empirical Application for the Evaluation of the Efficiency of the Tax-Benefit Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(4), pages 1-16, October.
    5. Eissa, Nada & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2008. "Evaluation of four tax reforms in the United States: Labor supply and welfare effects for single mothers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 795-816, April.
    6. Mickael Beaud & Thierry Blayac & Patrice Bougette & Soufiane Khoudmi & Philippe Mahenc & Stéphane Mussard, 2013. "Estimation du coût d'opportunité des fonds publics pour l'économie française," Studies and Syntheses 14-01, LAMETA, Universtiy of Montpellier, revised Oct 2014.
    7. Kathy Hayes & Shawna Grosskopf, 1985. "Measuring the Welfare Loss of Pension Mandates: A Methodology and Example," Public Finance Review, , vol. 13(1), pages 47-62, January.
    8. 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.
    9. Blinder, Alan S & Rosen, Harvey S, 1985. "Notches," American Economic Review, American Economic Association, vol. 75(4), pages 736-747, September.
    10. Jerry A. Hausman, 1980. "Income and Payroll Tax Policy and Labor Supply," NBER Working Papers 0610, National Bureau of Economic Research, Inc.
    11. Kevin J. Mumford, 2007. "The Optimal Tax Treatment of Families with Children," Discussion Papers 06-020, Stanford Institute for Economic Policy Research.
    12. Alex Luiz Ferreira, 2007. "On the Transmission Mechanism of Monetary Constraints to the Real Side of the Economy," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 43-54.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kathy Hayes & Shawna Grosskopf, 1985. "Measuring the Welfare Loss of Pension Mandates: A Methodology and Example," Public Finance Review, , vol. 13(1), pages 47-62, January.
    2. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    3. Mervyn A. King, 1983. "The Distribution of Gains and Losses from Changes in the Tax Treatment of Housing," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 109-138, National Bureau of Economic Research, Inc.
    4. Nan, Gehuang D., 1995. "An energy Btu tax alternative," Resource and Energy Economics, Elsevier, vol. 17(3), pages 291-305, November.
    5. M. Ali Khan & Edward E. Schlee, 2016. "On Lionel McKenzie's 1957 intrusion into 20th‐century demand theory," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 589-636, May.
    6. Driffill, E John & Rosen, Harvey S, 1983. "Taxation and Excess Burden: A Life Cycle Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 671-683, October.
    7. Piggott, John & Whalley, John, 1996. "The Tax Unit and Household Production," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 398-418, April.
    8. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421, Elsevier.
    9. H. Allen Klaiber & V. Kerry Smith, 2013. "Developing general equilibrium benefit analyses for social programs: an introduction and example," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 6, pages 194-246, Edward Elgar Publishing.
    10. Mickaël Beaud & Thierry Blayac & Patrice Bougette & Soufiane Khoudmi & Philippe Mahenc & Stéphane Mussard, 2013. "Estimation du coût d'opportunité des fonds publics pour l'économie française," Working Papers halshs-01077141, HAL.
    11. 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.
    12. Mora Rodriguez, Jhon James, 2013. "Introduccion a la teoría del consumidor [Introduction to Consumer Theory]," MPRA Paper 48129, University Library of Munich, Germany, revised 08 Jul 2013.
    13. Qidi Zhang & Leonard F.S. Wang & Yapo Yang, 2020. "Indirect taxation with shadow cost of public funds in mixed oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(3), pages 415-425, April.
    14. Mark D. Agee & Thomas D. Crocker, 2002. "On Techniques to Value the Impact of Environmental Hazards on Children's Health," NCEE Working Paper Series 200208, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Sep 2002.
    15. Homburg, Stefan, 2010. "Allgemeine Steuerlehre: Kapitel 1. Grundbegriffe der Steuerlehre," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92547, November.
    16. Bills, Tierra S. & Walker, Joan L., 2017. "Looking beyond the mean for equity analysis: Examining distributional impacts of transportation improvements," Transport Policy, Elsevier, vol. 54(C), pages 61-69.
    17. Liqun Liu & Andrew J. Rettenmaier, 2004. "The Excess Burden of the Social Security Payroll Tax," Public Finance Review, , vol. 32(6), pages 631-650, November.
    18. Eissa, Nada & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2008. "Evaluation of four tax reforms in the United States: Labor supply and welfare effects for single mothers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 795-816, April.
    19. Jerry A. Hausman, 1980. "Income and Payroll Tax Policy and Labor Supply," NBER Working Papers 0610, National Bureau of Economic Research, Inc.
    20. Smith, V. Kerry, 2000. "JEEM and Non-market Valuation: 1974-1998," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 351-374, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0495. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.