The deadweight loss of income taxes - Have economists really measured what is relevant?
2000 (German)In: Ekonomiska samfundets tidskrift, ISSN 0013-3183, Vol. 53, no 1, 71-+ p.Article in journal (Refereed) Published
The concept deadweight loss, or excess burden, is central in economists' analysis of the effects of income taxes on the allocation of resources. The normal, definition of this concept can be questioned since it does not refer to the real change in the allocation, but to the hypothetical change that would occur if the individuals were compensated. An alternative definition is suggested, according to which the relevant measure is the uncompensated elasticity, i.e. the sum of the substitution and the income effects. Since this elasticity typically is smaller than the compensated, i.e. the substitution effect, which is the normal definition of deadweight loss, it can be argued that normal measurements overestimate the deadweight loss of income taxes.
Place, publisher, year, edition, pages
2000. Vol. 53, no 1, 71-+ p.
IdentifiersURN: urn:nbn:se:kth:diva-19679ISI: 000086465700008OAI: oai:DiVA.org:kth-19679DiVA: diva2:338371
QC 201005252010-08-102010-08-10Bibliographically approved